The Deconfinement Plan In Spain (Or The Road To The “New Normal”) Will Last Eight Weeks

spain deconfinementSpain's spending last year was also lower than in 2009 financial crisis

Yesterday the Spanish government presented its plan to de-escalate the country’s confinement and reactivate economic activity. The deconfinement process will last about eight weeks and, in the words of Prime Minister Pedro Sanchez, will be guided by “prudence”.

Starting next Monday May 4, the plan contemplates 4 phases, each with a duration of two weeks. However in practice, each province will follow a different pace depending on its health and epidemiological situation. Pedro Sánchez warned that this rate of de-escalation would be maintained as long as the evolution of the epidemic is controlled in each and every one of the territories. This means that economic activity will be kept at a minimum for at least the next two months.

During the first phase, Phase 0, the preparation stage for the gradual lifting of restrictions, people can to go out for a walk or do sports individually. Small shops will also re-open, but appointments must be made. During Phase I, certain activities will be partially initiated and then Phase II will allow premises to open with limited capacity. When Phase III is activated, general mobility will be made more flexible. The phase will be modified according to markers such as the health service’s capacity, the epidemiological situation and mobility and socio-economic data. There will be no mobility between provinces or islands until all the phases are completed at end-June. The exceptions will be for work or extraordinary situations.

The mere announcement of the deconfinement plan is being taken as synonymous with the worst being behind Spain. That said, it has generated certain doubts. For example, the conditions imposed in the initial phases will make it economically unviable to for many businesses to re-open, particularly those linked to the hotel and tourism sector.

With regard to tourism, and from the point of view of Spain’s interior, it seems the population of some large provinces may not enjoy inter-provincial mobility until the beginning of July. Two of these will probably be Madrid and Barcelona due to the impact of the COVID-19 on both. So, according to Intermoney analysts, “it looks like domestic tourism will improve very slowly. Moreover, we can practically write off international tourism for 2020.”

“For the moment, France is limiting the mobility of its population to 100 kilometres. Meanwhile, Germany and the United Kingdom have already made clear their opposition to their citizens making long trips to certain destinations. An opposition which is also beneficial for these countries, since, in a year of crisis, the fact they are pushing domestic tourism boosts GDP.”

France and Portugal also presented their plans for de-escalation yesterday. Germany began to implement its own last week, given its better situation in terms of number of infections and deaths from Covid19. For Link Securities, the Spanish government’s plan, “unlike those presented in other countries, does not set a specific date for de-escalation. In fact, everything indicates that it will be slower than in other countries, with the consequent negative impact on our economy.”

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.