Brussels expects a 9.4% recession and a 10% deficit this year in Spain

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The European Commission estimates that the Spanish recession in 2020 will be around -9.4% of GDP , the worst in the entire Union after Greece (-9.7%) and Italy (-9.5%). At the same time, it also expects the recovery in 2021 to be also the strongest (+ 7%), after Helena (7.9%) and France or Lithuania (+ 7.4%).

This is clear from the data of the Spring Macroeconomic Forecasts , one of the four major annual statistical appointments of the department led by the Italian Paolo Gentiloni , and that this year he has been forced to do an impossible calculation exercise. The Commission paints a very gloomy scenario, with a contraction in the Eurozone of 7.7% of GDP for a comeback next year of only 6.3%. For the Union as a whole, the figures would be -7.4% and + 6.1% respectively.

The public deficit will soar to 10.1% of GDP this year (the highest in the EU after Italy) and would still remain at 6.7% in 2021, the worst figure in the entire continent after closing 2019 in the 2.8%, after the correction by Eurostat a few weeks ago, which increased the figure almost two tenths with respect to what was reported by the Government for the year.

"In 2019, the central government deficit increased for the first time since 2012, from 2.5% to 2.8% of GDP. The increase was driven by growth in spending, which outpaced revenue growth after the increase public sector pensions and wages, "the report read.

"In 2020, the recession is expected to have a profoundly negative impact on public accounts. The reduction in tax bases is expected to lead to a significant drop in income, while rising unemployment and the extensive use of ERTEs lead to large increases in social transfers.In addition, health care spending is increasing significantly.These factors, along with already enacted increases in public sector pensions and wages, should bring the deficit to around 10% of the GDP in 2020. The imbalance should be reduced to less than 7% of GDP in 2021, assuming that there are no policy changes, "he explains, referring to the absence of Budgets .

In 2019, the Spanish economy grew by 2%, and the latest winter forecasts for Brussels pointed to a slowdown that would lead to 1.6%, before the virus.

"Unprecedented contraction of activity"

"The strict containment measures implemented in Spain in response to the outbreak of the Covid-19 pandemic are expected to result in an unprecedented contraction in economic activity. Production should rebound strongly once restrictions are lifted, but the Recovery will be uneven across sectors and lost output will not fully recover within the forecast horizon. Measures to limit job loss and support the private sector will cushion some of the impact of the crisis. Still, the rate is forecast unemployment will increase significantly this year, and only part of this increase will reverse in 2021. The recession is bound to further deteriorate government accounts, "the document warns.

Just two months ago, Gentiloni declared himself unable to gauge what effect the coronavirus would have on the continental economy. Things are still not very clear, but like other international organizations, study centers and private boutiques, the Commission has had to enter the game, just a few days after each and every Member State referred to Brussels. its National Reform Plans and Stability Programs , with the latest available data.

For our country, drinking from these provisional official sources, the cascade of figures in red is, in many of the categories, the worst. Thus, unemployment would rise to 18.9% and 17%, only surpassed by Greece once again and with twice the average of the continent.

"Complicated and uneven" normalization

The data on public debt is not better: the estimate of the community technicians is 115.6% and 113.7% for this year and next, an increase of 20 points since the closure of 95% of GDP in 2019. But here the comparison with the neighbors is not so bad, because the numbers that are handled seem from a science fiction tale. The Commission fears a rebound in Greek debt to 196.4% of GDP this year, from Italian to 158.9%, from Portuguese to 131.6% and from Cyprus, France and Belgium to around the 113-115% also, leaving the Eurozone average at 102.7%, an outrage when compared to the already high 86% with which 2019 closed.

All this starting from a scenario of gradual and slow return to the normalization of economic activity, which the technicians feel is complicated and uneven. Thus, industrial activity would do so earlier, but was diminished by problems in global distribution chains. But the service sector, with tourism prominently, will do so at a much slower rate, if at all.

"If all production constraints are removed in early 2021, activity should experience some rebound during the first half of the year, and then gradually moderate, but remain above potential in the second half. This, along with the drag from the strong push of the last quarters of 2020, would bring annual GDP growth to 7% in 2021, leaving production in 2021 approximately 3% below its 2019 level, "states the report published today.

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