Spain is once again in the lead when it comes to the effects of the global coronavirus pandemic. After experiencing the biggest contraction in the entire European Union between April and June, and heading the second wave of infections, the country is now headed for the biggest decline in activity of all developed economies in 2020.
In its latest World Economic Outlook, released on Tuesday, the International Monetary Fund (IMF) predicted that the Spanish economy will shrink by 12.8% this year, the biggest contraction of all advanced economies. There is no precedent for such figures in modern Spanish history. A decline of 12.8% makes any other crisis seem small by comparison.
The IMF concedes that “the uncertainty surrounding the baseline projection is unusually large” due to all the public health and economic factors involved in the pandemic, but the research still provides a useful comparison between Spain and the rest of the world.
The unemployment rate in Spain in 2020 and 2021 is expected to hover around 16.8%
The euro zone, for instance, is expected to contract by an average 8.3%, and the American economy to shrink by 4.3%. Spain ranks 17th on the global list of biggest drops in gross domestic product (GDP), right there with Libya’s ravaged economy and with tiny nations such as the Maldives and Aruba, which are extremely dependent on tourism.
The job market does not afford a more favorable image. The unemployment rate in Spain in 2020 and 2021 is expected to hover around 16.8%, nearly two points above the figure that emerged from the second-quarter labor force survey EPA. Again, such numbers are unheard of in advanced and emerging economies, with the sole exception of Greece, where the jobless rate is expected to hit close to 20% this year.
Despite the dismal forecast, the IMF’s numbers do not come as much of a surprise, as they resemble the Spanish government’s own recent prediction that the economy will contract by 11.2% this year. And in September, the Bank of Spain said that it was expecting a GDP decline of anywhere between 10.5% and 12.6%, although a worsening epidemiological situation suggests that things could get even worse.
In recent public statements, Bank of Spain governor Pablo Hernández de Cos and European Banking Authority president José Manuel Campa warned that what began as a health crisis is now an economic crisis that could extend to the financial sector and put more than one bank up against the ropes.
As for 2021, the IMF expects Spain to grow at a faster rate than the euro zone as a whole – 7.2% compared with 5.2% – while the Spanish government is hoping that the effects of the European recovery fund will push growth to 9.8%.
English version by Susana Urra.