September 26, 2020

Economists see third-quarter recovery threatened by flare-ups


Madrid

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The General Council of Economists (CGE) has maintained its forecast of a fall in GDP for this year at 11.2% and augured a unemployment rate between 20% and 22% conditional on the temporary employment regulation files (ERTE) being maintained until the end of the year. Otherwise, the impact of the health crisis on unemployment will be greater.

This is reflected in his latest Financial Observatory, in which economists also they have maintained their forecast of deficit and public debt for this year in ranges that go from 12% to 15% of GDP in the first case, and between 120% and 125% in the second.

The CGE has underlined that the moderate economic reactivation started after the termination of the alarm state «not being enough» to compensate for the losses sectors such as tourism, leisure, culture and commerce suffered during confinement.

«The expected recovery from the third quarter is being seen threatened by the outbreaks of the pandemic, which are emerging throughout the country, and could accelerate in September with the beginning of the school year and with the lack of homogeneous measures in the different autonomous communities, “they warn.

To this is added that ERTE linked to the pandemic expire on September 30In the absence of an extension, so if they are not extended, the unemployment rate will rise more than expected.

Thus, the CGE has recommended extend beyond the end of the year some of the measures adopted by the Government to alleviate the effects of the pandemic on the economy, including the ERTE, and remember that Germany has already decided to extend them until the end of 2021.

Other Budgets

At the same time, economists ask for new Budgets, agreed with the majority of political parties, that conform to the current situation, since the current ones date from 2018 and the current situation is “radically different”.

«The significant reduction in income (it is estimated that VAT collection has decreased by 50% in the second quarter) and a considerable increase in spending, fundamentally to defray the health expenditure produced by the pandemic, as well as that generated by the measures adopted to alleviate the economic effects on certain groups, make it essential and urgent to approve new budgets adapted to this situation, “he defended.

The CGE believes that the public accounts of 2021 should include the destination of European aid, being assigned to specific projects, for which he considers essential to have the collaboration of the private sector, as well as to establish measures to favor R & D & I sectors that enhance productivity and training, especially in new technologies.

In this sense, economists have considered that it would be a good time to address the resizing of the civil service structure of the State to adapt it to the new challenges of digitization and the environment.

They also advocate establishing, at least in the short term and while the situation stabilizes, incentives to hire labor, with flexibility with respect to it, and tax incentives for companies, as well as establishing measures to boost investment, either foreign or national, “Currently almost nil”.

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