The impact of the pandemic on Spain’s businesses
Fecha: may 2021
SEFO, Spanish and International Economic & Financial Outlook, V. 10 N.º 3 (May 2021)
IndexThe impact of the pandemic on Spanish household and corporate sector accounts
Data show that COVID-19’s impact on Spanish households has been smaller than that sustained by its non-financial corporations, thanks in part to generous support schemes for Spanish workers. Going forward, additional measures will be required to buoy Spanish firms, but this could leave Spain´s public debt more vulnerable if the ECB tightens its monetary policy stance.
While the effect of COVID-19 on Spanish business demographics has been unprecedented, it has also been unequal, with certain sectors hit harder or recovering faster than others. For this reason, any economic recovery plan should consider the needs and vulnerabilities of specific sectors.
In comparison with peer countries, Spain’s manufacturing output held up relatively well amidst a historic contraction in GDP. That said, despite its strong track record in job creation prior to the crisis, the number of hours worked and employees in the manufacturing sector fell as a result of the pandemic.
Although the Spanish government has focused on average enterprise size as a means
of closing the productivity gap, studies show that it is productivity that determines size. In
order to spur business creation, more attention should be paid to those factors that shape
the internal costs of growth in Spain.
Spanish banks: Contraction and recovery against the
backdrop of COVID-19
European and Spanish banks’ share prices took a significant hit during the worst periods of the COVID-19 crisis, only to outperform other stocks once a recovery took hold. Interestingly, banks’ CoCo bonds performed even better, registering a smaller contraction and a stronger rebound.
The pandemic has accelerated the use of new payment technologies, such as mobile and P2P payments, with future growth projected in the use of QR codes and biometric payments. However, only once the crisis dissipates will it be possible to assess the strength
of these trends.
The spike in Spain’s deficit in 2020 was the result of higher spending and lower tax revenue due to the COVID-19 pandemic. Although the government is forecasting smaller deficits in the coming years, Spain lacks a credible deficit consolidation plan.