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New forecasts from Brussels confirm that Spain is the EU member state which is most affected economically by Covid-19. In fact, the European Commission has made a downward adjustment of more than a point to the economic forecasts of the Spanish government for this year. In its autumn calculations, the European executive estimates that the Spanish GDP will fall by 12.4% in 2020, a figure that slices another 1.5% off the figure that was predicted in July.

The Commission is also less optimistic about Spain's recovery, with calculations that are down by almost two points - to 5.4% - for the expected rise next year, after the Pedro Sánchez government had estimated that the country would grow by 7.2% in 2021.

Spanish government forecasts, questioned

The EU is not the only economic authority that has questioned the official Spanish forecasts in recent hours. The governor of the Bank of Spain, Pablo Hernández de Cos, warned on Wednesday that the economic scenario contemplated by the 2021 Spanish budget, yet to be approved by parliament, is "optimistic" considering that the recovery has been losing intensity. "The Spanish executive's calculations based on the progress of GDP and the arrival of European aid may not match reality," asserted the bank.

Comments along similar lines were made by the president of Spain's Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, this Thursday, indicating to the Spanish Congress that the forecasts used by the government in its draft 2021 budget would only apply if there was a scenario with a "more or less controlled" health situation, a reduction in Covid restrictions and a "partial Christmas campaign", in addition to the appearance of a treatment or vaccine this year to contain the virus. This last element could be expected only in a highly optimistic scenario.

The European Commission expects unemployment in Spain to stand at 16.7% this year, 0.4 per cent less than the government's forecasts. Despite next year's economic recovery, Brussels estimates that Spanish joblessness will rise to 17.9% in 2021.

The EU member most affected by the pandemic

As for the deficit, the European Commission also believes it will be higher this year than the government estimates. The EU executive's forecasts raise it to 12.2%, whereas the Spanish leadership anticipates 11.3%. In addition, the Commission estimates that the deficit will remain high over the next two years, at 9.6% in 2021 and 8.6% in 2022.

The pandemic also raises the estimates for public debt for this year. This will reach 120.3% of GDP, according to calculations by the Commission, which predicts that Spain will not be able to reduce its debt in the next two years. In fact, the European executive predicts that debt will continue to rise, up to 122% in 2021 and to 123.9% in 2022.

These new EU forecasts represent a further reduction in expectations compared to July, when the European body predicted a fall in Spanish GDP of 10.9% this year and growth of 7.1% in 2021. In addition, it certifies that Spain is the EU member state which is worst affected economically by the pandemic. The second most affected state, according to the Brussels forecasts, is Italy, with a 9.9% drop in GDP this year. The third is Croatia, with a fall of 9.6%, and the fourth France, with a 9.4% decrease in GDP, according to the ACN news agency.

With respect to the eurozone as a whole, Spanish GDP will fall by more than four and a half points in 2020 compared to the euro area average, for which a fall of 7.8% is estimated this year. In contrast, Brussels forecasts that Spanish GDP will grow more than one percentage point above the eurozone average next year. The forecast for the euro area's GDP for next year is a rise of 4.2%.

 

Main image: European Commission president Ursula von der Leyen, at a recent conference of Spanish autonomous presidents. Photo: Europa Press

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