European Central Bank President Christine Lagarde warned a week ago that containment measures put in place by European governments to mitigate the second wave of contagion have caused “clear economic deterioration”. An evolution that was confirmed yesterday by the European Commission in its new autumn forecasts in a context of extreme uncertainty.
According to Brussels, the Eurozone will contract slightly more than expected this summer, by 7.4%, and will grow less in 2021 (4.1%) and 2022 (3%). The scenario for Spain is even more complicated. Gross domestic product (GDP) will collapse by 12.4% in 2020, the worst fall in the EU, with a rise much lower than initially forecast in the next two: 5.4% in 2021 and 4.8% in 2022. These are much lower estimates than those forecast in the spring by the European Commission, which predicted a 9.4% drop in GDP in 2020 followed by 7% growth in 2021, or the data included in the macroeconomic picture presented at the beginning of October by the Government of Pedro Sánchez which assumes a fall in economic activity in Spain this year of 11.2% although followed by a larger rebound of 7.2 % in 2021.
The EU executive is not so optimistic, and although there is an echo of the rise in activity during the summer after the reopening of internal borders, it predicts a slowdown during the last quarter of the year that will make the economy remains at the end of 2022 3% below the previous growth level before the coronavirus broke out.
“The covid-19 pandemic and the strict containment measures put in place in Spain to contain it have led to an unprecedented recession in economic activity this year. Measures to limit job losses and support the business sector have cushioned the impact “and” production will recover strongly in the second half of the year, but the recovery will be uneven in all sectors and the This year’s significant increase in the unemployment rate will only be partially reversed in the next two years “, sums up the EU executive in the chapter dedicated to Spain.
Positive impact of ERTOs
The analysis recognizes the positive impact of employment regulation proceedings (ERTOs), which have been extended until the end of January 2021, to mitigate the loss of jobs, especially in the most affected sectors such as tourism. “These schemes have done much to contain the loss of employment but have not been able to avoid them altogether,” says the Commission, which projects an unemployment rate of 16.7% in 2020, which will soar to 17.9% in 2021. , due to the gradual elimination of ERTOs, to fall again in 2022 to 17.3%. The Commission’s new forecasts also show a deterioration in public finances due to a reduction in public revenues. According to estimates, the public deficit will soar to 12.2% this year, almost one point above the government’s forecast. The gap will shrink in the next two years as activity picks up and measures introduced against the pandemic are eliminated, but it will do so very slowly: at 9.6% in 2021 and 8.6% in 2022. Meanwhile, and due to the large public deficit and the sharp contraction in GDP, government debt will continue to soar: to 120.3% in 2020, 122% in 2021 and 123.9% in 2022.
The forecasts do not take into account the positive impact expected by the Spanish executive through the reform and investment plan that will be funded by the Recovery Fund agreed by EU leaders to deal with the pandemic and which is still in progress. negotiation phase between the Council and the European Parliament.