Feel Capital | Until September, the government will have pay out over €39.4 billion euros in benefits to the more than 9.8 million pensioners in Spain, as well as to people claiming widowhood, permanent disability, orphanhood and family favour benefits. As a result, it will be forced to take extraordinary measures this summer after the emptying of the pensions’ piggy bank.
The number of unemployed in Spain increased by 26,573 people in May, compared to 282,900 the previous month and -84,075 in May 2019. This is the worst May figure in recent years, but it is a vast improvement on previous months (up 282,000 in April and up 302,265 in March).This may be enough to raise some optimism in the Spanish labour market. The labour market data for May also reflects an increase of 97,462 people registered with Social Security compared to the previous month.
Last Friday, the Government approved the minimum living wage, which will guarantee an income of between 461 and 1,015 euros for 850,000 Spanish households. The measure aims to reduce extreme poverty in the country by 80%. The government had planned to promote this measure during its legislature. But faced with the serious economic emergency resulting from the pandemic, it has decided to bring it forward.
Scope Ratings | A series of debtor-friendly national and regional decrees introduced before the pandemic was already weighing on investor sentiment. But the sharp economic downturn has exacerbated uncertainties that were building up and will depress recovery rates on NPL portfolios even further.
The automotive sector was already in a difficult situation before COVID-19. The Spanish market is not escaping this crisis and has already seen its first victim with the announcement of the Nissan plants’ closure in Barcelona. The closure, which is expected to take place in December, will cut around 3,000 direct jobs at the plant and an additional 20,000 indirect jobs. The sector represents 10% of Spanish GDP and the three Catalan factories produce 1 in 5 vehicles assembled in Spain.
Link Securities | According to preliminary data from the Spanish National Institute of Statistics (INE), the Consumer Price Index (CPI) fell to -1% year-on-year in May (-0.7% in April). The drop reflected the decline in fuel and oil prices, while food prices continued to rise. May inflation has not seen a decline to -1% since 2016. We do not rule out that the entire Eurozone could end up heading into deflation over the coming months, at least those economies most penalized by the pandemic.
Bankia Estudios | As expected, the improvement in the external sector observed in the first two months of the year did not continue in March. The Covid-19 crisis hit both exports and imports hard, with setbacks of more than 14% year-on-year: only trade in chemical products, mainly medicines, and food was exempt from the contraction. The Q1’20 accumulated drop in Spanish exports (3%) is similar to the one noted in the EMU (3.2%) and Germany (3.3%), but much lower than that in France (8.6%).
Today Spain is taking another step towards the “new normal” with Madrid, which is the country’s economic driver, Barcelona and Castilla y León, the areas most affected by the pandemic, moving into Phase 1. The remaining 29 provinces, plus the autonomous cities of Ceuta and Melilla, are now entering Phase 2. Furthermore, the tourism season is expected to start at end-June for the Spanish population and at the beginning of July for foreigner visitors. The tourism industry accounts for over 12% of Spain’s GDP.
Intermoney | What is clear is that the finances of countries like Spain are only sustainable thanks to the ECB’s very important support. And also thanks to the EU’s action which is much better than in the previous crisis. If the German and French Recovery Plan, based on subsidies, is successful, Spain’s need for financing will be lower; in other words, Community transfers would help keep net financing well below the 130 billion euros target.
Santander Credit Research | The Spanish government approved a fourth tranche (€20 billion) of the €100 billion worth of guarantees for corporate loans which was announced on 24th March. This is part of the economic aid package to mitigate the negative impact of the containment measures imposed due to the Covid-19 outbreak. The new tranche approved will be aimed entirely at guaranteeing loans to small and medium sized enterprises (SMEs) and the self-employed.