The Spanish economy will accelerate the pace in the second semester to the beat of the extension of the vaccination process and the arrival of European funds. Brussels has raised its growth forecast for this year to 5.9%, three tenths more than in February. For next year, the European Commission believes that community aid will boost the Spanish economy by 6.8%, compared to the 5.3% it had forecast so far. The expansion that Spain will experience will be, in both years, the highest in the entire EU, which as a whole will grow by 4.2% in 2021 and 4.4% in 2022. Even so, Spain will recover its Gross Domestic Product ( GDP) prior to the pandemic at the end of next year, a year behind the European Union as a whole.
The European Union, which entered a recession in the first quarter of the year, is beginning to regain optimism. The vaccination rate is finally higher than in the United States or the United Kingdom. And despite the fact that its economy is still in tow of Washington and Beijing, it finally believes that it will be able to take flight also thanks to the massive aid that it will begin to send to the capitals in summer and that is estimated to have an impact equivalent to 1.2 % of GDP by the end of 2022. In fact, Brussels expects a strong boost in public investment in 2022, 3.5%, so that it will reach its biggest boost since 2010.
Spain, which suffered a collapse of 10.8% in 2020, will lead the growth of the euro zone thanks to the lifting of restrictions, with the arrival of 34,750 million euros of European funds between this year and the next one. of the committed reforms. Brussels also anticipates the moment in which Spain will recover its Gross Domestic Product (GDP) prior to the outbreak of the pandemic. It will do so at the end of 2022, and not in 2023, as predicted in previous forecasts.
The date on which countries return to pre-crisis levels is key to deciding whether the European Union keeps fiscal rules suspended next year. The Commission has recommended doing so, but some countries, including Germany, asked to wait first to see the Commission’s prospects before settling the matter. Despite the fact that the German economy dragged the euro zone as a whole into recession, Brussels predicts that by the end of this year it will have recovered the level of activity before the depression caused by COVID-19. Even so, the Commissioner for the Economy, Paolo Gentiloni, has warned that the EU is still not going to regain the growth trajectory that it maintained before the crisis. “Recovery is no longer a mirage: it is underway. We must avoid mistakes that could undermine it, in particular, a premature withdrawal of support for the economy ”, he stated. Based on this provision, the general escape clause [que suspende las reglas fiscales] it will remain until the end of 2022 ″, he added.
In the case of Spain, the costly recovery of tourist and leisure activity will still weigh heavily. Brussels believes that the contribution of external demand to GDP growth will start to be positive next year, when tourism activity will probably approach its 2019 level. Even so, the enormous weight of this sector implies that the recovery is, according to Brussels, subject to more uncertainties than normal. If the vaccination campaign progresses as planned and the aid arrives on time, Spain is set to take off from the second half of the year. “If it is implemented [el plan de recuperación] efficiently, with the combination of strategic projects accompanied by extensive reforms, the economic impact will be significant, particularly in 2022, when the strong effects of demand will be accompanied by a gradual contribution from the supply side “, says the report of the Commission.
In addition to the uncertainty about the tourism sector, Brussels continues to see the same risk as just a few months ago: that the deterioration in business profitability will translate into a wave of insolvencies that jeopardize “productive capacity and employment.” Even so, the Commission highlights the package of measures adopted in March to support SMEs. Despite the measures to protect employment and the self-employed, the Commission believes that the unemployment rate will still increase slightly to 15.7% this year and will drop to 14.4% next year. That means that Spain will continue to have the second highest unemployment rate in the EU, behind only Greece.
Although in a more moderate way, Brussels is close to the government’s forecasts, which foresees an increase in GDP of 6.5% in 2021 and 7% in 2022. The improvement in the outlook also implies a smaller gap in public accounts. The public deficit will fall from 11% in 2020 and this year will remain at 7.6% of GDP, compared to the 9.6% that the Commission indicated in November and will stand at 5.2% in 2022. The trajectory of the debt will also have a greater downward slope: Brussels expects it to go from 120% last year to 119.6% this year and 116.9% next year.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.