S&P worsens growth forecasts for Spain compared to improvements in Italy or France

S&P worsens growth forecasts for Spain compared to improvements in Italy or France

The agency has revised down its estimate of the country's decline for 2020, from the contraction of 9.8% that it expected in June to the -11.3% that it points to in September

S&P worsens growth forecasts for Spain compared to improvements in Italy or France

Forecasts for the Spanish economy worsen in step with the increase in infections and the threats of new restrictions. The last to certify it has been the S&P agency, which has worsened the country's decline estimate for 2020, from the contraction of 9.8% that it expected in June to the -11.3% that it points to in September. Spain thus becomes the only country in which S&P revises the outlook downwards, compared to the improvements it forecasts for Germany, France, Italy or the Netherlands.

The agency thus follows in the wake of other institutions that in recent weeks have lowered their recovery expectations for Spain, from Funcas (the Savings Banks Foundation), which estimates that the annual contraction will reach 13%, to the Bank itself. Spain, which discarded its first option (a more positive scenario of a fall between 9% and 11.6%) and is now betting on a contraction between 10.5% and 12.6%.

S&P, like the rest of investors, does not lose sight of the high number of cases and the rapidity of the spread of infections, which once again put on the table the possibility of new restrictions and containment measures. To this is added the political factor, that is, the lack of agreement to carry out the General Budgets, possible tax increases or the modification of structural reforms, and all together could weigh down the recovery underway after the stoppage of the second quarter .

The agency itself warned a few days ago when reviewing the rating of Spanish sovereign debt. “We could lower the rating in the next two years if Spain does not consolidate its public finances. We believe that the possible failure to approve the PGE for the third consecutive year would raise doubts about the effectiveness of Spanish policies,” stated the note published by the firm. which maintained the rating from notable (A), but downgraded the outlook from stable to negative.

Looking ahead to 2021, however, S&P Global Ratings points to a rebound for Spain of 8.2% of GDP, and 4.3 and 2.6% in 2022 and 2023, respectively.

Regarding the unemployment rate, the agency estimates that 2020 will end at 16% and will rise to 17.5% in 2021. Only in 2022 will it fall below 16% (15.6%) and in 2023 it will be at 14.3%.

Improvement in the Eurozone

Regarding the estimates for the Eurozone, the company improves its estimate of economic growth forecast for this year by four tenths compared to its last forecast in June. Specifically, it points to a 7.4% drop in GDP, compared to the 7.8% decline estimated in June. The exit from confinement of several of the European countries caused an upward rebound in private consumption that is behind this improvement in the estimate.

Despite the improvement, the rating agency warns of the impact that three factors may have on the economic performance of Europe: a new lockdown, a hard Brexit and a delay in the research and production of vaccines against Covid-19.

The rating agency also corrects up its estimate of growth of the euro area economy for 2021, from 5.5% initially estimated in June to 6.1%. For 2022 and 2023, S&P targets euro zone growth of 3% and 2%, respectively.

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