On Thursday, the European Commission worsened its forecasts on the Spanish economy’s performance. It now expects a slump in GDP at the end of 2020 of 12.4%, compared to the 10.9% estimated a few months ago. This is the most severe decline in the entire European Union.
Spain will be the only country in the region with an over 10% drop in its economy this year. So the reduction in GDP will be greater than those of Italy (-9.9%), Croatia (-9.6%), France (-9.4), Portugal (-9.3%) or Greece (-9%), the other partners most affected by the pandemic.
According to the new projections from Brussels, the Spanish economy will see rebounds in the next two years and will expand by 5.4% in 2021 and 4.8% in 2022. After that period, Spanish GDP will still be 3% below its pre-crisis level.
In its section on Spain, the European Commission highlights that the COVID-19 pandemic and the “strict” containment measures led to an “unprecedented” reduction in GDP in the first half of the year. This was partly offset by a “strong rebound” in the industrial and services sectors in May and June.
Subsequently, the resurgence of “numerous outbreaks” in the summer led many countries to impose a quarantine on those citizens who had travelled to Spain. This was then coupled with the reintroduction of new social distancing measures during the autumn. As a result, the report flags that the upsurge in activity will be “exhausted” in the last quarter of 2021.
In any event, Brussels has reported that its forecasts do not incorporate the potential positive impact of aid from the European recovery fund on the economic performance in 2021. According to their calculations, real GDP growth could add on 2.5 percentage points next year.
Meanwhile, the Spanish government, through the Minister of Inclusion, Social Security and Migration, José Luis Escrivá, has warned that these macro forecasts from Brussels “have become outdated.” They have not collected data from the Labour Force Survey and on GDP for the third quarter, which is much better than expected.
Escrivá also has stressed that international agencies tend to be more misguided in their forecasts than private sector entities. He insisted that these estimates are only useful “as a point of comparison with other countries,” but not at the individual level.