«The information referring to the fourth quarter points to a certain additional slowdown in the output of the economy, which, in any case, would be of moderate magnitude, in line with the focused nature of the containment measures applied, whose impact is more severe on the branches of services, in which personal contact is more intense ”. This is one of the main conclusions of the quarterly report of the Spanish economy of the Bank of Spain, published today. The crisis, far from dissipating, is getting worse in the heat of the new restrictions on activity.
The institution recently published its projections for the country. For the last three months of the year wait a contraction of up to 3% quarter-on-quarter in the severe scenario, 0.8% in the central scenario (the most likely) and a 0.6% rise in the mild scenario. Three scenarios depending on the evolution of the pandemic and the application of the vaccine. In its report today, the supervisor recalled these figures again and issued several alerts.
“Business investment would have declined in the last months of the year, affected by high uncertainty,” says the document. The Bank of Spain thus explains that “the materialization of numerous investment decisions could be delayed due to the high uncertainty regarding future sales, the significant decrease in the degree of use of installed capacity and the decrease in resources available to carry out these expenses. The different employers have been warning about the investment drama in recent months; now the productive fabric is not in it, but to survive.
So much so that, as ABC reported, ICO guarantees for investment launched by the Government have turned out to have no effect. They have no demand and are parked, while the Ministry of Economy is already evaluating formulas to reorient those public guarantees (40,000 million) that have proven a failure at this time.
But the warnings of the Bank of Spain go beyond this matter. In his report, he also focuses on “A new relapse of trade with the exterior in the final part of the year”. The truth is that the foreign sector has been very resentful of the pandemic and, as this newspaper published, recently faced the decline again. The institution points out that “the most recent information available would indicate that the contribution of net exports to the growth of the product would have returned to negative territory in the fourth quarter, with a more pronounced weakening of exports – weighed down, in particular, by the fall of non-resident tourism— than of imports. It should be remembered that the foreign sector accounted for slightly less than 35% of GDP in 2019, which gives a good account of its importance for Spain.
This more adverse scenario in the fourth quarter due to restrictions could also have a negative effect on the most vulnerable in the economy. «A greater persistence of the current crisis could cause a worsening of the financial situation of those agents who are in a situation of greater patrimonial vulnerability, thus amplifying the adverse economic effects of the pandemic. And in relation to this, the Bank of Spain recalls a circumstance that it outlined two weeks ago in an analytical article: «Different microsimulation exercises developed by the Bank of Spain show that the health crisis in 2020 will cause a significant increase in the percentage of companies that support a high financial pressure —Understood as the insufficiency of the results generated to cover the interest on the debt—, to around 40%, as well as a deterioration, although more moderate, in the solvency of the corporate sector.
Beyond this, the institution has once again challenged the government’s calculations on the economic impact of its recovery plan with the arrival of European funds. He has already warned of the execution risks of all Community money in his recent projections and has now emphasized again: “The uncertainty about the concrete materialization of the use of the resources of the geu it is still high. ‘ And he marks as “high” the uncertainty about its impact.
Thus, in its projections it already warned that its contribution to GDP in 2021 would barely be 1.3 percentage points, compared to the 2.6 expected by the Executive. The Bank of Spain even calculated that the effect in the 2021-2023 triennium would be 1.7 points, which is below, in fact, what the Government estimates for only one year.
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