December 4, 2020

Brussels worsens forecasts for Spain and predicts that GDP will fall by 12.4%


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The European Commission predicts that the Spanish GDP plummets 12.4% this year due to the coronavirus pandemic, a drop worse than that forecast in July of 10.9%, and the largest among eurozone countries. If fulfilled, it would be more than one point of fall of what the Government of Sánchez predicts.

The new macroeconomic forecasts of the Community Executive, published this Thursday, also cut the rebound in GDP expected for 2021, which will be 5.4% compared to 6.1% projected in summer, while in 2022 they expect it to grow 4.8%.

“The COVID-19 pandemic and the strict containment measures put in place in Spain to contain it have led to an unprecedented decline in economic activity this year,” says the Commission report, which predicts an “uneven recovery between sectors “And a” significant increase “in unemployment, even though the measures adopted by the Government have” cushioned “the blow to employment.

The second wave of infections this autumn and the new restrictions to curb it will delay the recovery throughout Europe, and in the case of Spain they will make the strong rebound registered in the third quarter, when GDP grew by 16.7 % after a record slump in the first half of the year of 22.1%. As a result, by the end of 2022, Spanish GDP would remain 3% below the 2019 level.

The Commission predicts, on the other hand, that the unemployment rate will increase to 16.7% this year and 17.9% the next, as ERTE protection ends, and that it drops to 17.3% in 2022.

The ERTE and the unemployment benefit for the self-employed “have done a lot to contain the loss of employment, but they have not been able to avoid it in its entirety,” he points out.

On the fiscal side, the Community Executive projects that the public deficit will increase to 12.2% of GDP this year as a result of the fall in tax collection and the measures against the pandemic. In 2021, as these are eliminated, the deviation would be reduced to 9.6% and in 2022 to 8.6%.

As a consequence, the Commission foresees that the public debt increase by 25 points this year, to 120.3% and that it continues to grow at 122% in 2021 and 123.9% in 2022.

The landscape outlined by Brussels is more pessimistic than the latest macroeconomic picture of the Government, which projects that GDP will contract by 11.2% this year and rebound by 7.2% next (to 9.8% if the policies are fully implemented). European aid) and that the unemployment rate stands at 17.1% and 16.9% (16.3% with the measures), respectively.

The deficit would go to 11.3% of GDP this year and 7.7% next year, while the debt would reach 118.8% of GDP and 117.4%, respectively, according to the table presented in October .

The forecasts of the Community Executive, however, do not take into account the potential positive impact of the Recovery Plan to use the 140,000 million European aid for the pandemic that the Government sent it in October, which estimates that these measures would add 2.5 points to GDP.

Higher growth, the result of the implementation of these reforms and investments, would help a “more favorable evolution of the debt”, says Brussels.

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