The European Commission estimates that the Spanish economy will contract 10.9% this year, the worst figure on the continent after 11.2% in Italy . This is indicated in its Summer Macroeconomic Forecasts , published this morning and in which it worsens by a point and a half the 9.4% that it was forecast just a few months ago. In exchange, the tables point to an intense recovery of 7.1% in 2021 , one tenth higher also than expected in the last quarterly evaluation.
The value of these data is merely indicative. Models are not accurate enough and all parts know it. The technical services, with national data, foresee that the Eurozone will drop 8.7% in 2020 and the next one will rebound 6.1%, so that Spain, always an extreme economy, will lead in the bad but will be among the three strongest from January in the recovery, along with France or Slovenia.
No one is saved from the recession in the EU. Those who are provisionally better unemployed are Hungary , with a fall of 4.6%, Denmark with 5.2% and Sweden , with 5.3%. All three, by the way, outside the euro . According to the Forecasts, all the economies of the single currency will close with a contraction of at least 6% in 2020.
"The coronavirus has claimed the lives of more than half a million people worldwide, a number that continues to grow day by day and in some parts of the world at an alarming rate. These forecasts show the devastating economic effects of that pandemic. The political response in Europe has helped cushion the blow for our citizens, yet ours remains a story of growing divergence, inequality and insecurity, which is why it is so important to reach agreement on the recovery plan proposed by the Commission to inject new confidence and new financing in our economies at this critical moment, "said Commissioner for Economic Affairs, Paolo Gentiloni, referring to next week's European Council that will have to decide on the plan and the Community Recovery Fund.
"The economic impact of confinement is more severe than we initially expected. We continue to navigate stormy waters and face many risks, including another major wave of infections. These forecasts are a powerful indication of why we need an agreement on our ambitious package of NextGenerationEU recovery to help the economy. Looking to the remainder of the year and the next, we can expect a rebound, but we will have to be vigilant at different recovery rates. We need to continue to protect workers and companies and coordinate our policies closely at the EU level to ensure that we can emerge stronger and united, "said Vice President Valdis Dombrovskis.
The European Commission publishes its forecasts four times a year, but in summer and winter it only makes a partial exercise, with data on growth and inflation but without touching employment, debt or the public deficit. Its data for Spain is better than that of the IMF, for example, which scared the end of last month with a model that predicts a recession of 12.8% this year and an improvement of just 6.3% next year. The Bank of Spain, for its part, offers a fork with various scenarios, assuming the impossibility of precision, between 9% and 15% m with a central scenario of -11.6%.
In its Spring Forecasts, the Commission estimated a drop of 9.4%, but it already warned that the deterioration was the most predictable, since then there was no clarity on how long the total confinement would last and what would be the rate of reopening. The numbers now do not have a value beyond the estimate either. Recovery will depend, for example, on the size and effect of the Recovery Plan agreed by the EU, on the speed at which funds begin to be distributed, on the success in choosing projects and sectors to inject cash. And also, and very notably, of how it is possible to save what is possible from the tourist season.
Although the next few quarters are caught with tongs and there is a constant fear of outbreaks, Brussels, without ringing the bell, believes that the worst we have already suffered economically. "Economic output is expected to have contracted significantly more than in the first quarter. However, the first data for May and June suggests that the worst may be over now," today's report says. The recovery is expected to gain strength in the second half of the year, although it remains incomplete and uneven in all Member States. The impact on the EU economy is symmetrical because the pandemic has affected all Member States. However, both the drop in production in 2020 and the strength of the rebound in 2021 will differ markedly. We now think that the differences in the scale of the pandemic's impact and the strength of the recovery will be even more pronounced than expected in the Spring Forecast, "they warn.
On the positive side, technicians believe that the possibility of a vaccine reasonably soon may offer hope. But due to the negative, and beyond the pandemic, there are clear risks: a Brexit without an agreement or a very bad one on December 31, the protectionist threat and problems in the supply chains. Not to mention the tensions with China and the US elections.
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