Lack of resources and high uncertainty will weigh down the Spanish recovery

Spain will suffer this year an unprecedented economic downturn. It will not be the only one, but it will be where it is most noticeable. The national GDP will plummet 12.8% according to the IMF, which places ours as the developed country that suffers the greatest economic contraction. Behind Spain are only 16 countries around the world, but most of them are destinations such as Fiji, Maldives, Bahamas or Mauritius, places where their only way of income is tourism, low minimum.

The euro area average will fall by 8.3%, almost five points less than Spain and Italy, Portugal, France and Greece will be ahead of our country, but none will exceed a 10% drop. And the worst is not this year, already lost, but the next. The agency predicts that in 2021 Spain (7.2%) will be the economy that grows the most in the EU, which will bounce 4%, which will mean a loss of three trillion euros in terms of GDP in just two years. Thus, The IMF estimates that it will be necessary to wait until 2023 for the economic level of 2019 to recover in Europe, and also in Spain.

It is not only the IMF that gives such pessimistic data. National organizations such as BBVA Research are also in the same line. This week it revised its forecasts with a strong cut for the fourth quarter, which goes from advancing 6% to only 2%, which will mean an even worse scenario at the beginning of 2021. Thus, the body has reduced growth from 7% to 5% expected for next year, a figure that could rise to 6% thanks to EU aid.

“It is an unprecedented fall since wartime,” explains Miguel Cardoso, chief economist for Spain at BBVA Research, who stresses that the recovery in the second semester will also be so, but that even so in 2021 we will continue to be 5% below the economic level of 2019. “It will take at least three years to recover the pre-pandemic figures”, he points out, and that is if there are no extreme confinements like the one in March that shatter the forecasts. And is that the great enemy of the Spanish economy is uncertainty on the one hand and the high incidence of the virus, on the other.

But why is Spain the country that will fall the most in this crisis? The experts consulted agree that the high dependence of our economy on the services sector and tourism is causing this crisis of social isolation to affect Spain more, in addition to the Spanish productive fabric, formed mostly by SMEs and micro-SMEs, for those who find it more difficult to overcome potholes of this caliber. Cardoso also affects the temporary employment, a point to which the IMF itself also referred in its conclusions on Spain. “The job destruction in the first two months of the crisis was much greater here despite the fact that ERTE was used for the first time. Membership fell by 5% because about 25% of workers have contracts of days or weeks and employers decided not to renew them due to the high uncertainty.

Adapt ERTE

Íñigo Fernández de Mesa, vice president of the employers’ association (CEOE), explains that in addition confinements in Spain were stricter and longer than in the rest of Europe, which had a greater impact on consumption. It also alludes to the public sector “has not done its homework in times of economic boom”, so there are now fewer resources to support the most affected sectors. And, finally, it ensures that the recurring announcements of the Government of tax hikes “They generate great uncertainties for investors.”

Calls for European funds to be used ‘wisely’ and for training have a very important role. Ángel de la Fuente, Fedea’s executive director, agrees on this idea: «We have a lot of people who have not worked for six months And it would have been good if they spent all that time training in case they have to change jobs.

The ERTEs have been the great protection mechanism for families in the face of the crisis, but experts agree that they must be adapted to the new situation after the shock of the first wave. «At the beginning, when the meteorite fell, the important thing was to protect as many people as possible, but then you have to adapt them to transfer resources between more competitive sectors ”, explains De la Fuente.

The economy is going to change and jobs should too. That is the thesis of Toni Roldan, director of the EsadeEcPol Economic Policy Center, who argues that “the extension of the ERTE has a limit because this situation cannot be sustained forever. It is likely that people will travel less in the next few years and part of the hotel and tourism industry will lose their jobs, these people will have to be relocated. “A large part of the ERTE that remain will become EREs”, he assures.

For its part, Joaquin Maudos, deputy director of the Ivie and professor at the University of Valencia, explains that the objective should not only be to return to the Gross Domestic Product from before the crisis, but to improve the potential result with “Structural reforms, which have been in the trunk of memories for years.” For this, it is essential to “take advantage” of European funds and propose projects that push for the necessary reforms, such as the pension, tax or educational system and “focus investment on the determinants of productivity, such as R&D. , human capital or intangibles ”.

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