The good growth data that Spain will experience between now and the end of the year should not make government deviate from the needs to undertake structural reforms on the economy. Pablo Hernández de Cos, Governor of the Bank of Spain, has been clear in his speech at the seminar ‘The economy of the pandemic’, organized by the APIE and BBVA at the Menéndez Pelayo International University (UIMP) of Santander.
“It would be a mistake to be impressed by the growth in the coming quarters,” commented the supervisor’s leader, to continue with the fact that the national economy will require the aforementioned reforms to increase potential growth and face the vulnerabilities that it drags. «The objective of increasing potential growth with structural reforms is now greater because the damage of the crisis can only be dealt with adequately and at a lower cost with more sustainable growth that can be prolonged over time ”, he added.
These words are spoken after
have improved your forecasts in recent weeks. The Bank of Spain more than three months ago anticipated that GDP would rebound, in its central scenario, by 6% in 2021, 5.3% in 2022 and 1.7% in 2023 in the central scenario. But in its latest revision this June, those figures are 0.2, 0.5 and 0.1 percentage points higher. It improved its figures, and already provided data for the shortest term, this second quarter that is ending. In the fourth quarter of last year there was no growth and in the first of this year GDP fell by 0.5% in quarter-on-quarter terms. The situation between April is very different. In this sense, the institution estimates that the economy will grow between April and June by 2.7% in the favorable scenario, 2.2% in the central scenario and 1.4% in the adverse scenario, vigorously beginning the recovery.
However, he has repeatedly recalled that these good rebound data should not “Darken” the reformist landscape. Reforms that will have to go, according to De Cos, to tackle low productivity and the diffusion of the labor market, as well as in the long term to face the challenges of aging, climate change and inequality. He also stressed that European funds can help “to finance structural reforms.”
Beyond that, the governor has claimed to “take public finances seriously” from now on to guarantee their sustainability. Thus, it has requested to design as soon as possible “a fiscal consolidation program” that can be executed once the recovery has been consolidated. “It would be a mistake to withdraw the stimulus prematurely and it would also be a mistake not to design the fiscal consolidation program,” he explained.
The Government, mainly the wing of United We Can, has proposed in recent weeks to continue raising the Minimum Interprofessional Salary (SMI). All this despite the latest Bank of Spain document on its effect on the labor market. The supervisor calculated in his report that the 2019 increase, approved without agreement with the social agents,
could cost the Spanish economy between 83,000 and 180,000 jobs, due to a lower growth in employment.
De Cos, when asked about it, explained that “benefits are generated for those who maintain employment and negative effects for those who lose it”, but that in any case the decision corresponds exclusively to the political sphere. Even so, he stressed that in a crisis situation like the current one, with still low GDP and employment levels, “an additional element of prudence” is required in the face of further increases in the SMI.