SPAIN’S government has slashed its forecast for economic recovery during 2021 blaming a COVID-induced contraction in the first quarter and delays to the arrival of EU rescue funds.
Instead of annual growth of GDP of between 7.2% and 9.8% during 2021, Spain’s government has revised it down to 6.5%, the economy minister, Nadia Calvino announced on Friday.
“The recovery is delayed by one quarter,” Calvino said, adding however that the government expected a strong increase in the second half of 2021.
Spain’s economy relies heavily on foreign tourism which accounts for 12 percent of GDP annually in a typical year, however the coronavirus pandemic has all but halted foreign tourism.
It was hoped that Spain would reopen to foreign tourists by spring, but supply problems, delays in vaccination programmes plus the fear of importing new more contagious strains have once again delayed opening the country.
During 2020, Spain posted a record contraction of 10.8%, the largest contraction in recent history.
The Bank of Spain had already downgraded its 2021 growth forecast to 6%, while the International Monetary Fund predicts a 6.4% expansion.
But Calvino insisted that output would return to pre-pandemic levels by the end of next year, expanding by 7%.
She warned that although unemployment would hit 15% this year, it was kept well below the 27% jobless rate seen in the last economic crisis, thanks to the ERTE scheme which sees employees in struggling firms furloughed.
The European Union recovery fund will also help with its promised €140 billion destined for Spain, although delays in its disbursement means most of the impact will not be felt until 2022.
Next week will see Prime Minister Pedro Sanchez present Spain’s final recovery plan.
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