The collapse of the Spanish economy in 2020 will be lower than that forecast just three months ago (-10.8%) and the rebound in 2021 and 2022 will be much greater , with growth of 5.9 and 6.8% in Domestic Product Gross respectively.
The latest spring economic forecasts, presented this Wednesday by the European Commission , improve the figures of three months ago and offer a more optimistic outlook. The EU recovery plan and the 69.5 billion in non-refundable transfers allocated to Spain through the Next Generation EU will play a “decisive” role in this rebound .
“The implementation of the recovery and resilience plan is expected to play a decisive role, driving the rebound in the second half of 2021 and helping to sustain economic expansion over the forecast horizon,” says the report prepared by the European Commission that places Spain as the country that will receive the most subsidies and that assumes that half of the planned volume will be absorbed over the next two years.
“If implemented efficiently, with a combination of strategic projects accompanied by extensive reforms, the economic impact will be significant, particularly in 2022,” says the Community Executive who considers that Spain will be able to absorb 12,000 million in 2021 and 22,000 million in 2022.
After the lifting of some restrictions and the acceleration registered by the vaccination campaign, the Commission estimates that the rebound will take shape during the second half of the year, which will allow Spain to grow by 5.9% in 2021, three tenths above the expected three months ago, to reach pre-pandemic levels at the end of 2022 when it will grow by 6.8% of GDP.
In both years, Spain will be the EU economy that grows the most, above the average for the Eurozone (4.3% and 4.4% respectively) and the EU (4.2% and 4.4%) , but below the forecasts of the Spanish Government. The curator Paolo Gentiloni, which has described the outlook for Spain as “positive”, has attributed the difference to the fact that it will take “a certain time” for the recovery plan projects to have an impact on the economy, which will take place especially in 2022.
“With the prospect of a relaxation of restrictions in the second half of 2021, it is expected that part of the accumulated savings caused by the pandemic will be spent, which will stimulate private consumption but also investment,” explains the Community Executive who also trusts in which the greater absorption of funds from next year will in turn attract private investment and generate a “carry-over effect . “
In addition, next year the contribution of external demand to GDP growth is also expected to be positive, once tourism-related activities return to the level they registered before the COVID19 outbreak.
Uncertainties on the horizon
Despite this greater optimism in Brussels, the Spanish horizon is not exempt from uncertainties either due to doubts about the recovery of tourism-related activities , the response of private agents to the relaxation of restrictions, the size and impact of the public measures to cushion the blow of the pandemic as well as the absorption of funds from the recovery plan.
Second country with the most unemployment
In addition, although measures such as the Employment Regulation Files (ERTEs), which expire on May 31 and that the Pedro Sánchez Government has proposed to extend until September 30, have helped mitigate job losses, Spain continues to be the second country in the EU, behind Greece , with the highest unemployment rate in the entire EU (15.5%), and it will continue to be in 2021 (15.7%) with a slight rebound, and in 2022 ( 14.4%) with figures that double the average of the Eurozone (8.4% and 7.8% in 2021 and 2022) and in the EU (7.6% and 7% respectively).
During this time, the Spanish public authorities have also strengthened business liquidity through public guarantees for new bank loans and payment defaults, among other measures. However, “the deterioration of profitability could lead to the materialization of insolvencies of companies with risks to productive capacity and employment,” warns the Commission.
Regarding the evolution of the deficit , the response to the covid19 crisis caused the hole in public accounts to shoot up eight points last year, to 11%, the largest in the entire EU, somewhat more bulky due to the reclassification of the SAREB. In 2021, the forecast is that it will be reduced to 7.6% and 5.2% in 2022 thanks to the impact of economic growth derived from the recovery plan.
The public debt , meanwhile, soared to 120% last year. This year it will fall slightly to 119.6% and as growth increases and the deficit shrinks, it will continue to gradually shrink to 116.9% by the end of 2022.
