(CEOE) estimates that the economic impact of the COVID-19 crisis will be greater than initially anticipated and argues that the stoppage of activity since the second half of March will result in a drop in GDP estimated at 5% for the whole of the year, if there is a more intense recovery, in which the end of the confinement is estimated for the first days of May.

In any case, the Spanish economy will not escape a serious recession, the degree of which will depend on other factors still to be calibrated, such as, for example, the effectiveness of the measures that have yet to be activated to facilitate the recovery of activity. In this sense, 2020 would be a lost year from the economic point of view. The recession in the worst case scenario could mean a drop of 9% of GDP, while unemployment will increase by at least 560,400 people . The unemployment rate would thus increase to 16.5% from the 13.8% with which closed 2019.

CEOE points out that the exceptional nature of the situation "makes it difficult to predict central scenarios" because the evolution of the health crisis itself or the degree of effectiveness of the measures is unknown. In any case, the organization calls for measures that are aimed at facilitating the adaptation of companies to the new situation, granting more flexibility, supporting liquidity, enabling the tax moratorium and focusing on exports as an exit lever.

All in all, taking into account that the economy is facing an 'impact shock' this time, activity levels could reach in December those existing at the end of 2019 , so the recovery in a scenario like the current one should be faster than when we witnessed a cycle end like the last recession, "the report said. In its most optimistic scenario, if all the factors involved in the recovery align, it is estimated that GDP would experience a notable rebound of 5.2% next year.

Shock and deficit plan

The report estimates that the financial needs to implement the economic shock plan will mean an increase in public spending of between 25,000 and 30,000 million euros.

Thus, the cost of spending measures in the health field and to cover vulnerable groups would amount to between 5,000 and 6,000 million. To this should be added the spending associated with the rise in unemployment and among other 5,000 and 6,000 million more due to the salary increase of officials and the revaluation of pensions.

Regarding income, employers point to the drop in consumption as the main factor in the erosion of public accounts in terms of direct and indirect tax collection.

"The collection will fall mainly on VAT," predicts CEOE. "A prudent estimate would mean a reduction in the collection of this tax for the year as a whole of between 10% and 20% -from 7,000 million to 14,000 million-, depending on how long it takes for consumption to recover after confinement" .

Altogether, adding the collection of taxes such as hydrocarbons, personal income tax, companies and contributions to Social Security, the total loss of collection could be between 8% and 15% depending on the depth of the drop in activity and the speed of its subsequent rebound. In this way, the coronavirus crisis would result in a public deficit of between 80,000 and 120,000 million euros , in a range of 7.5% and 11% of GDP, depending on the behavior of the activity. At the same time, public debt would rise to 108% or 115% of GDP from 98% today.

According to the criteria of The Trust Project

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  • CEOE
  • Personal income tax
  • Social Security
  • Unemployment

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