The Bank of Spain believes that it will be difficult for the country's economy to recover from the crisis caused by the coronavirus pandemic, and in 2022 the country's GDP may be more than 6% lower than before the crisis.
Spain's GDP in the second quarter of 2020 collapsed by a record 18.5% from the previous quarter after falling 5.2% in the first quarter.
In the third quarter of this year, according to the forecast of the Bank of Spain, the economy may grow by 13-16.6%. At the same time, the Central Bank warns that the strong economic recovery that began after the easing of quarantine restrictions has slowed down since July, as the increase in incidence resumed, and in August, some economic indicators began to decline.
The Central Bank presented two scenarios in accordance with which the situation in the economy may develop, depending on the epidemiological situation, while noting the persistence of high uncertainty.
The first scenario, in which economic activity will be less affected by restrictive measures, assumes a decrease in Spanish GDP by 10.5% this year and its moderate increase in the next two years. Under this scenario, GDP in 2022 will be 2% below the 2019 level.
In a more pessimistic scenario, Spanish GDP will fall 12.6% in 2020 and remain more than 6% below last year's level in 2022.
Spain has been hit harder by the pandemic than most European countries, both in terms of morbidity and economics, writes the Financial Times. Spain's economy is heavily dependent on the tourism sector, which has been effectively paralyzed by the pandemic. In addition, the economy is dominated by small businesses, which often simply do not have enough resources to survive in a sharp downturn, experts say.
Under the pessimistic scenario of the Central Bank, unemployment in Spain will be 22.1% in 2021 and will decrease slightly – to 20.2% in 2022, while the national debt will soar to 128.7% of GDP in 2022 from 95.5% in 2019 year.
The calculations of the Bank of Spain do not take into account the assistance that the country can receive from the emergency program of 750 billion euros approved by the EU countries. Spain hopes to receive 140 billion euros in subsidies and loans from this program, but the Central Bank is not yet able to assess the potential impact of this assistance on the economy.