Spain’s economic outlook for 2020 worsens

Spain’s leftist government on Tuesday, October 6, forecast a deeper-than-feared contraction of the economy in 2020 as the country grapples with a second wave of COVID-19 infections.

Economy Minister Nadia Calvino said the government now sees the economy, the eurozone’s 4th largest, falling 11.2% in 2020, compared with a previous forecast in April for a 9.2% slump.

But she said the economy was expected to rebound in 2021 with growth of at least 7.2%, mainly on the back of higher private consumption.

Spanish authorities imposed one of Europe’s strictest lockdowns to curb the pandemic from mid-March to late June, triggering one of the deepest recessions in the region.

The economy tumbled by 17.8% in the 2nd quarter after falling by 5.2% in the 1st quarter, but Calvino said the recovery was “ongoing” in the 3rd quarter. 

A recession is commonly defined as two consecutive quarters of a contraction in gross domestic product.

The unemployment rate will rise in the tourism-dependent country to 17.1% this year, from 14.1% last year, and will only drop to 16.9% in 2021, according to the government’s latest forecast. (READ: Ibiza: Between economic distress and unprecedented calm)

Although the national lockdown was lifted in late June, Spain is currently fighting a second wave of the virus which has now killed over 32,000 people and infected more than 800,000, the highest infection rate within the European Union.

Spain’s economy is particularly vulnerable to the pandemic because of its reliance on tourism and its greater concentration of small companies, many of which do not have the financial strength to cope with even a short-term disruption. (READ: Spain extends furlough scheme until end of January 2021)

However, it will benefit considerably from the historic 750-billion-euro rescue plan agreed by the European Union’s 27 member states in July under which it will receive 140 billion euros. – Rappler.com