9 Apr, 2021 @ 16:15
1 min read

Coronavirus impact on Spain’s economy is worse than we feared

Covid 19 Situation In Malaga, Spain 22 Jan 2020
An employee seen closing 'Lo Gueno' restaurant at Strachan street during the mandatory closure. The third wave of coronavirus disease has impacted most daily income in the Andalusia region after the Christmas holidays. Following the increase of infections, several regional governments decided to take new measures such as limiting mobility perimeters between cities and towns and closing hospitality and commercial sectors in the afternoon. (Photo by Jesus Merida / SOPA Images/Sipa USA) *** Local Caption *** 32075659

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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Fiona Govan

Fiona Govan joined The Olive Press in March 2021. She moved to Spain in 2006 to be The Daily Telegraph’s Madrid correspondent and then worked for six years as Editor of The Local Spain. She lives in Madrid’s Malasaña district with her dog Rufus.

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