October 20, 2020

Closing Madrid for two weeks will cost up to 5,600 million to the Spanish economy




The economic impact of a new confinement in Madrid it will be disastrous for the capital. But it will also spread like wildfire throughout the rest of Spain. The new measures to limit movements and economic activity come at a time of particular weakness, after the lockdown in March, the hardest and longest in Europe. The GDP rebound is at risk.

According to calculations by the employers’ association of Madrid to which ABC has had access, the limitations will have a cost in revenue of 600 million euros per week, which will cut the GDP of the capital by 15% every seven days. In addition, the lost activity, measured in number of hours worked, will be 18%, according to the same calculations.

Daniel Lacalle, chief economist of Tressis, puts figures to the blow to activity at the country level: the national GDP would fall by 0.2% in a soft-close scenario (time-bound, two weeks), and the 0.5% in a more adverse scenario. This places the range of losses in fifteen days between 2,200 and 5,600 million euros. “Madrid involves everything. There is no such thing as a selective impact, “he explains, adding that the added problem is that” the economy comes to this situation with particular fragility.

The collapse of GDP in the second quarter was 17.8% (the initial estimate of the INE was 18.5%); the deficit it shot up until August to 56,859 million euros, that is, 588% more than in the same period a year ago; Y the IMF alerted yesterdayIt is precisely that recovery is at risk if the outbreaks are not controlled. The management of the pandemic, in question.

The Bank of Spain, which every time it can advocate maintaining public aid and even increasing it, recently warned of around 25% of companies in Spain would be in technical bankruptcy. One in four companies looming over the bank of bankruptcy and lacking the muscle to withstand the stakes that another lockdown would entail.

The «lace» for the self-employed

The closure imposed by Health on Madrid’s communityThus, it does nothing but “give the last straw” to a multitude of businesses, as stated by Lorenzo Amor, president of ATA, the majority association of self-employed. «All this embarrassing spectacle of difference of criteria generates enormous uncertainty; It does not only harm Madrid but the entire economy, ”he says.

According to the calculations of this organization, around 30% of the self-employed in the Community of Madrid will be severely affected by the restrictions. “For many it will imply its closure because they can no longer endure”, details. In fact, ATA recently published a study on what 70% of self-employed workers they would not be able to endure another confinement. Now the measures are less severe than in March, but the impact is equally served. “The ERTE and the cessation of activity are not a lifeline, they will cushion the blow but sales will be nil. This is going to be very difficult for them to bear. Everything will depend on how long the restrictions last, ”says Amor.

Retail businesses and the hospitality industry will be the sectors of activity that will suffer the most negative effects with the imposition of Health, according to Ángel de la Fuente, executive director of Fedea. This expert recognizes that the effect will be considerably less than in the previous total confinement, for obvious reasons, “Although for some businesses in these sectors it could be hard”.

Uncertainty, in this sense, is an endemic disease that has plagued Spain since the beginning of the pandemic. Money is scary, they say, and the public reaction too. “We ask politicians to do an examination of conscience, see where they have been wrong. Because our freelancers have taken security measures that in no other country in Europe They have happened ”, says Amor. The“ we came out stronger ”that the Government defends seems to turn into weakness.

Among experts, the feeling is that the measures to be taken are excessive. So points out Gregorio Izquierdo, general director of the IEE, which explains that confinement or semi-confinement is not only a sanitary measure but also has an economic impact. “You have to analyze its marginal benefit, and it is very limited and lower than when it was applied in April. There are alternative measures, “he says.

For Ana Lopez, a professor at the Autonomous University of Madrid and secretary of the governing board of the College of Economists of Madrid, in a scenario of uncontrolled outbreak of coronavirus, the national GDP will fall by around 12% this year. And in the case of the Community of Madrid, due to its structure, it would do so by 11.7%. As it is, the fact that Spain is a country of micro-SMEs (96% of the business fabric, and 95% in Madrid) does not help to repel the blow of the crisis. “We will witness a second wave of business closures in the Community of Madrid if current economic problems intensify,” he says.

Likewise, Valentine Pich, President of the General Council of Economists, comments that among his main concerns is the image of the country that is being given. In a territory like Spanish that It depends so much on tourism and the exterior imageA, thinking about exports too, Spain cannot afford this type of confrontation between administrations, he says.

Spanish vulnerabilities

The major investment banks also emphasize the vulnerability of Spain. CitiSpecifically, it warns that our country has become the “epicenter” of the second wave in Europe. Although the entity gives little probability to a national confinement, the closures of certain regions or municipalities – it says – can affect the country’s total internal expenditure. To all this there is a «persistent political fragmentation» and the old challenges of the Spanish economy: debt, deficit, tourist dependence … 13% of GDP depends on this last sector.

Likewise, Standard & Poor’s, the main rating agency, recently revised the rating of Spain to a negative perspective due to the economic situation, the uncertainty in the country and the outbreaks of recent weeks. Before, other organizations such as Scope Ratings did. The outlook is not rosy.

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