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The BdE forecasts that GDP will fall to 11.6% in 2020 and an intense recovery from 2021


The Bank of Spain estimates a sharp decline in Gross Domestic Product (GDP) in 2020, followed by a relatively strong recovery in subsequent years, but subject to a high degree of uncertainty. This, after a strong increase in GDP has been registered in the third quarter, although recovery lost vigor As of the end of the quarter, according to the macroeconomic forecasts published this Friday, which also indicate that the evolution of the Covid-19 pandemic, the containment measures and the available activity indicators point to a deterioration of activity in the fourth trimester.

Specifically, the agency has set three macroeconomic scenarios that differ, fundamentally, in the behavior of the pandemic in the short term, the measures to contain it, the adaptation of the agents to the crisis and the persistence of its effects in the medium term.

As explained by the agency, in the soft stage an evolution of the controlled pandemic is recorded in the coming quarters, with a progressive relaxation of containment measures, and an agile adaptation of agents to the pandemic / restrictions. For his part, center stage it foresees new moderate outbreaks of the disease that require measures similar to the recent ones and that sectoral asymmetries are maintained on the path to recovery. An intense outbreak of the pandemic in the short term and later immunity, in addition to a tightening of containment measures and a more limited recovery and adaptation would be the factors of the severe scenario.

Thus, in the soft scenario, the Bank of Spain expects GDP to fall this year by 10.7%, to grow 8.6%, 4.8% and 1.9% in 2021, 2022 and 2023, respectively. In the central scenario, the fall of the Spanish economy would be 11.1% in 2020, to grow by 6.8%, 4.2% and 1.7% in the following three years. Meanwhile, in the severe scenario, GDP would decline by 11.6% in the current year and would increase by 4.2% in 2021, 3.9% in 2022, and 1.5% in 2023.

These figures the latest forecasts improve that the Bank of Spain announced in September, predicting a lower drop in GDP this year and greater growth in the coming years by including the effects of European funds. Furthermore, the improvement in forecasts is due to the downward revision of oil prices and somewhat lower financing costs. However, the recovery of the GDP level prior to Covid-19 will not arrive until mid-2023 on center stage, according to the report.


Regarding unemployment rates in Spain, the agency estimates that this year it will be between 15.7% and 16.2%. Looking ahead to 2021, it would increase to between 17.1% and 20.5%. In 2022 it would fall to a range of between 14% and 18.1%, and in 2023 it would be between 12.4% and 17.6%.

The Bank of Spain points out that the risk cannot be ruled out that, despite the "forcefulness" of the measures applied, such as the File of Temporary Employment Regulation (ERTE) or the improvement of liquidity to companies, "hysteresis phenomena" are registered in the labor market, or what is the same, persistent effects on employment once the reasons that caused them disappear. In addition, it warns that the crisis will leave "persistent effects" on economic activity and a "negative" impact on the workforce, to the extent that, despite the recourse to ERTEs and the self-employed workers' cessation programs, "there will be jobs that will not overcome the crisis and that will lead to a certain increase in long-term unemployment" .


The public deficit will fall to a range of between 6.7% and 9.6% next year, between 4% and 7.1% in 2022 and between 3.2% and 6.7% in 2023. Meanwhile, public debt will register a strong increase in 2020 up to around 120% of GDP in any of the three scenarios. Specifically, it will be between 113.7% and 122.8% next year, between 111.7% and 124.9% in 2022 and between 11.5% and 128.7% in 2023.

As detailed by the Bank of Spain, the health crisis and the set of measures to counteract the impact of the pandemic has caused a very marked deterioration of public finances, with which the public deficit will rise in 2020 to 10.5% in the central scenario, in a range between 10.3% and 10.9%, although throughout the projection horizon it is expected a substantial improvement, as a consequence of both the temporary nature of part of the discretionary measures adopted and the cyclical improvement.

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