The Great Lockdown of the Spanish economy

The Great Lockdown of the Spanish economy

Fecha: mayo 2020

Raymond Torres, María Jesús Fernández.

COVID-19, Previsiones económicas, Medias económicas, Política económica, Financiación, Impacto económico

SEFO, Spanish and International Economic & Financial Outlook, V. 9 N.º 3

In view of the depth of the global crisis, and taking into consideration key domestic imbalances that predate it, Funcas has revised its economic forecasts for Spain. Our baseline scenario now predicts an economic contraction of 8.4%, with adverse effects on unemployment, the deficit, public debt levels, and GDP remaining below pre-crisis levels
until 2023.

Abstract: Economic restrictions imposed on March 13th, as well as broader global dynamics, will have a material impact on previously published forecasts. For this reason, Funcas has updated its economic projections. Our baseline scenario now predicts GDP will contract by 8.4% in 2020, with the public deficit and debt levels reaching over 10% and nearly 114% of GDP, respectively. Data indicate that retail, accommodation, food services, cultural and sports activities, and personal services sectors are the most directly affected by lockdown measures. The only sectors expected to end the year with a similar level of GDP prior to the COVID-19 crisis are the primary sector, the mining and energy industries, healthcare and education. As expected, employment levels have also deteriorated, though much less than in earlier crises thanks to short-time work arrangements.Indeed, 3.3 million employees are registered as part of a government sponsored furlough scheme. Although the external sector is expected to make a small positive contribution to GDP, tourism receipts and exports have fallen significantly. Importantly, the Spanish economy’s ability to rebound will largely depend on the maintenance of jobs at sustainable enterprises, the rapid implementation of government programmes, and the Spanish Treasury’s ability to capture financing at reasonable terms.

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