Brussels is raising its 2020 growth forecast for Spain to 1.6%, one tenth of a point higher than its previous estimate. The economy is expected to expand by 1.5% in 2021, in line with the Spanish government’s own projections.
The figures are part of the European Union’s Winter 2020 Economic Forecast, which was published on Thursday. By comparison, GDP growth in the euro area is expected to remain stable at 1.2% in 2020 and 2021. In the EU as a whole, the projected growth is 1.4% for both years.
“Spain grew better than expected with a robust contribution by domestic demand and exports,” said Paolo Gentiloni, European Commissioner for the Economy.
We still face significant policy uncertaintyEU Economy Commissioner Paolo Gentiloni
But this subdued growth could be affected by external events. "We still face significant policy uncertainty, which casts a shadow over manufacturing. As for the coronavirus, it is too soon to evaluate the extent of its negative economic impact,” said Gentiloni, alluding to the respiratory disease that has reportedly killed 1,350 people by the latest count.
The virus known as Covid-19 has already had an impact on the Spanish economy: on Wednesday, organizers of the world’s leading mobile technology showcase, Mobile World Congress, announced they are cancelling the event after numerous exhibitors dropped out over health concerns. The trade fair brings an estimated €473 million to the Catalan capital each year.
At a news conference in Brussels, Valdis Dombrovskis, executive vice-president of the European Commission, said that despite the EU’s sustained growth, members should watch out for future risks.
“Member states should use this weather window to pursue structural reforms to boost growth and productivity. Countries with high public debt should also shore up their defences by pursuing prudent fiscal policies,” he said.
Spain has been told repeatedly in the past by the EU that it must introduce reforms to address long-standing issues such as its structural deficit and high debt levels.
It has been five years since Spain took any effective debt-reduction measures, save for 2016 when it was facing a fine from Brussels. In 2018, the EU was flexible with Spain because it was finally emerging from the Excessive Deficit Procedure, a program to monitor the accounts of member states that exceed the EU’s budgetary deficit ceiling.
The recent political instability – there have been four general elections in the last four years – also means that the country has yet to pass a new budget, and continues to function with the 2018 accounts.
English version by Susana Urra.