Unemployment in Spain will reach 19 percent this year and GDP will decline by 9.2 percent due to the coronavirus, according to the government’s most recent forecasts.
Madrid submitted Spain’s new budget stability plan and macroeconomic forecasts to the European Commission on Thursday night, as ministers warned that the coronavirus had “deeply affected” the country’s economic expectations.
“Before the pandemic, all forecasts pointed to a slight growth, a more balanced and sustainable growth. But in the first quarter the shock of [the coronavirus] has put an abrupt end to growth and the landscape has changed completely,” Economy Minister Nadia Calviño said at a press conference Friday.
The government’s GDP forecast is slightly worse than that of the International Monetary Fund, which predicted an 8 percent drop, but better than the Bank of Spain’s, which said it could decrease by 13 percent in the worst-case scenario.
Madrid estimates the country’s public deficit will surge to 10.3 percent of GDP this year — the biggest gap between income and expenditure since 2012. Spain had finished 2019 with its deficit at 2.8 percent. Meanwhile, public debt will increase from 95.5 percent of GDP in 2019 to 115 percent this year, the government said.
Calviño said the Spanish economy was expected to hit bottom in the second quarter of this year and then start an “asymmetric V” recovery, with GDP growing by 6.8 percent in 2021. But she warned that this was not certain.
The economic contraction is due to an 8.8 percent fall in households’ consumption, a 25.5 percent drop in investment and a 27.1 percent fall in exports, Calviño said.
María Jesús Montero, the government’s spokesperson and Treasury minister, ruled out tax increases to refill the public coffers, saying the strategy was to protect people’s pockets so they start driving up consumption as the lockdown is gradually lifted.
Earlier this week, the government defended Spain’s management of its deficit in the run-up to the pandemic, saying it had fallen by €5.5 billion in the first quarter of the year, which represents a 13.9 percent drop compared to the same period in 2019.
The government is set to ask lawmakers to back a fourth extension of the state of emergency, which gives ministers extraordinary powers to deal with the pandemic, as it begins to ease the restrictions put in place on March 13. But the opposition has become more reluctant to support a further extension.
Montero appealed to the “responsibility” of all political parties to maintain the state of emergency beyond May 10 and until the government’s plan to ease the lockdown restrictions has been completed, saying it would not be “coherent” to change their position now.