A Brexit without agreement and messy could subtract to the Spanish economy more than 9,000 million euros in a term of five years. That is, about 0.82 percentage points of GDP at a rate of between one and two tenths of a year, according to the calculations of the Bank of Spain from the projections made by the Bank of England in 2018.
In the event that the UK exit from the EU is orderly but without agreement, the cost would exceed 6,000 million, 0.5% of GDP. In this second case, it is considered that contingency plans work and that the willingness of the parties is that the problem does not increase. On the contrary, an outcome with a commercial agreement would have an almost non-existent invoice: just over 200 million, 0.02% of GDP thanks to the fact that the appreciation of the pound would compensate a good part of the losses. This is how it is collected in a document published this Tuesday under the title Brexit, balance sheet and perspectives.
Curiously, the Government of Spain has not made public some forecasts on this very explosive issue. On the other hand, the German Executive, for example, has estimated that its economy could see how it evaporates up to 2 points of GDP, proportionally more than double that in Spain.
70% of the losses estimated by the Bank of Spain are due to business relations. The rest is attributed to the effects it would have in other countries. These calculations are based on the four scenarios drawn by the Bank of England in its report forwarded to the British Parliament. In the first there was a successful negotiation for the United Kingdom, which even offered 1.75% more growth for the British economy. However, this has been ruled out because it is considered unfeasible at this point.
The other three cause growth losses for the United Kingdom. The first would be a commercial agreement in the style of the CETA of Canada with a transitional period, and would remove some 0.75 points of GDP from the British. The second would be an orderly exit but without agreement and in which tariffs would be established by default according to the rules of the World Trade Organization. This possibility would lead to a contraction of the United Kingdom economy of 4.75%. And the third, a Brexit for the brave, would collapse the GDP by 7.75 percentage points. This last one would suppose a recession of the magnitude that Spain has suffered and would cause "disruptions of the productive chains and financial instability", indicates the Bank of Spain.
In the first negative scenario there would be an appreciation of the 2% pound. And in the other two there would be depreciations of 15% and 25%, respectively. To these scenarios and their possible impacts on trade relations with Spain, the calculation of a shock growth in the rest of the euro zone, calibrating case by case with the aim of knowing better what would be the total consequences for the Spanish economy. According to the IMF, the EU would lose between 0.5% in the optimistic scenario and 1.5% if there was no agreement. Ireland, Germany, the Netherlands, Belgium and France would be the countries most affected by that order. Spain and Italy would be among the least affected, highlights the Bank of Spain.
In summary, the costs for the Spanish economy could be "significant", depending on the scenario, but they would not be "excessive," says the document from the supervisory body led by Pablo Hernández de Cos.
In any case, the Bank of Spain recalls that there is a lot of uncertainty about such estimates. His, based on those of the Bank of England, have come out harsher than those projected by the IMF. For example, financial and trust channels, which can amplify the effects, are not developed in detail in the model, the authors of the document admit. Conversely, Monetary or fiscal policy measures could be taken to mitigate the impact. Neither does it take into account the contingency plans that have already been adopted by the States or the negative long-term consequences of a less commercial opening. In general, experts point out that there are no similar precedents with which to do a simulation. And it seems very difficult to model a financial panic, the lack of specialized workers in certain sectors, changes in suppliers or limited access to some goods or services, to give some examples.
Despite the lack of similar references to Brexit, the Bank of England did set an example in its study that serves the United Kingdom: the case of New Zealand when the United Kingdom joined the EU in 1973. Then, the opening of commercial relations with the continent subtracted exchanges of New Zealand, country with which the British maintained a preferential treatment. New Zealand's economy took more than a decade to recover, says the British supervisor in a kind of notice for sailors.
In any case, an agreement would substantially minimize the problems, highlights the Bank of Spain, along the same lines as all international institutions have stated. If there is no fruitful negotiation, "contingency plans are essential to limit possible disruptions with potentially very harmful consequences," the document says. Regarding the financial sector, the report underlines that the preparations have been "intense", both in the EU and in the United Kingdom. Hence, the European Commission considers that the risks to the continental financial system have "significantly decreased". And that the Bank of England says that its entities are "sufficiently prepared" to absorb the impact of a Brexit without an agreement.