Recent developments in the course of the Covid-19 pandemic could force the Spanish government to update its economic forecasts.
While a May projection that Madrid sent to Brussels predicted a 9.2% drop in economic output in 2020, the Bank of Spain on Wednesday released a more pessimistic outlook that places the drop somewhere between 10.5%. % and 12.6%.
This is a drop from previous forecasts by the central bank, which expected gross domestic product (GDP) to decline by 9% to 11.6%.
Although the end of containment in Spain has raised hopes of a strong recovery, new epidemics of the coronavirus and travel restrictions imposed at the end of July have slowed down economic activity, especially in the hotel industry.
The short- and medium-term economic outlook remains strongly dependent on epidemiological developments, over which there is considerable uncertainty.
Bank of Spain
“The third quarter has gone from more to less, which means the start of next year will be worse,” said Oscar Arce, director general of the Bank of Spain for Economics, Statistics and Research.
In the two scenarios considered by the banking supervisor, in 2021, the economy could rebound either by 7.3% in the best situation, or by 4.1% in a scenario of more intense coronavirus epidemics in the short term.
âThe main difference between these two scenarios stems from the assumptions about how the pandemic will evolve over the next few quarters, which, in turn, determine the degree of severity of the containment measures that may be required and their consequent impact on it. economic activity. The Bank of Spain said in a statement.
Scenario 1 would only require confinement measures of a limited scope and would primarily affect reception services, while in scenario 2 the required restrictions could have a greater impact on the service sector, but also affect others. productive sectors.
It is not excluded that, in the coming quarters, more unfavorable epidemiological developments than those envisaged in scenario 2 may materialize.
Bank of Spain
The outlook speaks of more modest growth in activity in 2022. âAt the end of 2022, GDP would be around two percentage points below its pre-crisis level in Scenario 1, a gap which would widen to just over six percentage points in the scenario. 2. “
As for the impact of the Covid-19 crisis on the labor market, the banking supervisor estimates that unemployment could reach between 19.4% and 22.1% in 2021 if the ERTE system is phased out.
At the same time, public finances are also expected to fare badly, with public debt increasing this year “by more than 20 percentage points in Scenario 1 and by around 25 percentage points in Scenario 2, to settle respectively. at 116.8% and 120.6% of GDP. “The deficit” will increase sharply in 2020, to stand at 10.8% and 12.1% of GDP in each of the two scenarios considered. “
The Bank of Spain warns that “the economic outlook in the short and medium term remains strongly dependent on epidemiological developments, with regard to which there remains a high degree of uncertainty”.
Consequently, “it is not excluded that, in the coming quarters, more unfavorable epidemiological developments than those envisaged in scenario 2 may materialize”. However, these figures do not take into account the European stimulus funds that have been allocated to Spain, and which the Bank of Spain admits could have a relevant impact.
english version by Susana Urra.