The year 2021, and to a lesser extent 2022, will be a period of recovery for the Spanish economy, but the rebound will not be strong enough to offset the sharp drop caused by the coronavirus crisis.
In Spain, not even the deployment of a vaccine and two years of uninterrupted growth – which is expected to be 5% in 2020 and 4% in 2021 – will bring production back to pre-crisis levels anytime soon. In fact, it will take a strong year 2023 just to bring the economy back to this point, according to the Organization for Economic Co-operation and Development (OECD), which just released its December 2020 Economic Outlook.
According to this report, by the end of 2022, Spain’s gross domestic product (GDP) will still be 3.5% lower than it was on December 31, 2019. In a country that has seen some of the worst coronavirus outbreaks and suffered one of the worst outbreaks in the world. strictest confinements, the year 2020 will go down in contemporary history as the worst ever recorded in peacetime.
The increase in economic activity will only partially reverse the rise in the unemployment rate
OECD Economic Outlook December 2020
Economic activity is expected to contract 11.6% this year, five tenths of a percentage point more than the OECD forecast in June, before the second wave of coronavirus hits. Still, this is less than the 14.4% contraction that the international organization had expected at one point.
Still, Spain will experience the second-largest drop of any G20 country – a club it is not officially a member of, despite being a regular guest at its summits. Argentina is expected to end the year with a contraction of 12.9%, followed by Spain (-11.6%) and the United Kingdom (-11.2%). The average contraction for the G20 group this year will be 3.8%, according to OECD projections.
After the sharp decline in 2020, the Spanish economy will not experience a classic V-shaped recovery, but rather will grow more slowly than many of its European neighbors: Germany is expected to return to pre-crisis levels by the end of 2022; France will do so in the first quarter of 2023; only the UK will be worse off than Spain, ending 2022 four percentage points ahead of its pre-pandemic GDP level.
Elsewhere in the world, the United States will take a little over a year to rebound, while China – the big global exception – is expected to end 2022 with GDP growth of 15% from the end of 2019. The economy world should return. at the level of pre-crisis GDP at the end of 2021.
Spain: “a gradual and incomplete recovery”
In Spain, the recovery will be “gradual and incomplete”, according to the OECD report. In line with other national and international agencies, its experts predict that “the strong rebound in the third quarter of 2020 should be followed by a contraction in the fourth quarter”. The report notes that Spain is still experiencing restrictions affecting the hospitality and retail sector in several regions. Analysts also expect that “the increase in private consumption will be limited by the incomplete recovery of the labor market and high precautionary savings”.
The Paris-based organization estimates that the Spanish household savings rate as a percentage of disposable income will remain at unusually high levels in 2021 (9.8%) and 2022 (6.3%) after hitting a record 14 , 2% this year. Unlocking these reserves to convert them into investment or consumption will be one of the keys to growth.
“As business investment picks up, supported by low interest rates and declining uncertainty, continued low capacity utilization combined with weak corporate finances will limit the extent of the recovery,” the section explains. over Spain. Faced with these limits, “the increase in economic activity will only partially reverse the rise in the unemployment rate”.
The OECD also notes that the rate of exit from the ERTE job retention scheme slowed at the end of 2020, and it asks the Spanish government to increase training programs for workers who remain on ERTE “in order to improve their chances of finding a new job by expanding sectors and businesses.
Despite all the problems, the reality turned out to be less dire than predicted by the most pessimistic outlook, including the OECD’s own spring report. At the time, its analysts expected a second wave of coronavirus to result in 25% unemployment (it’s 15.8%, albeit largely thanks to job retention programs); household consumption fell by 14% instead of 17%, and public debt now stands at 117% of GDP instead of the expected 130%.
english version by Susana Urra.