The Bank of Spain trusts that the Spanish economy can recover the levels it had before the outbreak of the pandemic by the end of 2022 or, at the latest, in early 2023, almost a year later than the euro area as a whole due to the impact of the crisis in the country.
During his participation in the meeting ‘The value of experience’ organized by el Confidencial, the General Director of Economics and Statistics of the Bank of Spain, Óscar Arce, explained that the recovery of START in Spain it will take longer because economy, with a significant weight of tourism, has suffered the most.
Even so, the economist trusts that “within a year and a half” Spain can recover those levels of wealth prior to the pandemic, although that does not remove so that “important scars” such as public debt remain and we must emphasize this .
The increase in public debt has been “very high”, he recalled, and at the end of the first quarter it reached 125% of GDP, almost 30 points more than a year earlier, however, the origin lies in the measures to face the crisis, reason why it considers that this increase was “absolutely necessary”.
It’s more, the Bank of Spain continues to favor an expansionary policy in fiscal matters while the pandemic lasts, although he insists on the need to have a plan to reduce those levels of public debt and deficits “so large”.
In this way, the fiscal consolidation process could be undertaken as soon as the economic recovery is consolidated because it is “fundamental” to rebuild the margin of fiscal policy so that Spain is prepared for future crises.
Labor reform and pensions
The economist has defended the work of the Bank of Spain to measure the impact on employment of the increase in minimum wage, in addition to insisting on the need to reform the labor market and the pension system.
Arce argues that Spain needs a labor framework capable of adapting to a changing world and for this it is necessary to solve some problems such as the enormous duality, with a very high proportion of temporary workers whose situation is unstable and vulnerable.
That duality is a problem of economic efficiency but also of social justice because temporary employment especially affects young people, who also suffer from involuntary partiality, which in many cases causes them to only find jobs for less than 8 hours.
Regarding the reform of the pension system, the expert from the Bank of Spain considers that it is not enough only to lengthen the retirement age taking into account that life expectancy is higher, but other issues must be addressed “without taboos” and remembering that linking pensions to the advance of the CPI has a cost.
In 2050, “the day after tomorrow” speaking of these issues, the proportion will be practically 2 retirees for every 3 active persons, when now it is 1 retiree for every 3 workers, which shows the pressure on public accounts.
The inflationary tension
Regarding inflation, Arce has considered that 2.7% of the IPC in May it was expected, since the Bank of Spain anticipated that this year would see “high” rates, which would be “comfortably” above the objective of 2% in the euro area.
This increase in prices, however, is due to factors that should be transitory, such as the rise of many goods and services that fell sharply last year or the rise in prices of raw materials, oil, electricity, metals or agricultural products.
In conclusion, the inflationary tension will be “temporary” and Arce is convinced that it will begin to subside next year.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.