Spain’s economy will do slightly better than previously forecast, with a 2.4% GDP increase by the end of this month, the country’s Inclusion and Social Security Minister José Luis Escrivá predicted on Tuesday (8 December). EFE reports.
However, this is provided that some conditions in the battered Spanish job market and the overall economy are met before the end of 2020.
Escrivá said it was already possible – through the analysis of available economic data – to determine the current level of economic activity in Spain “quite accurately and, with some assumptions, to estimate already the results in the fourth quarter.”
On Tuesday, the Spanish minister tweeted that Spain’s GDP would increase by 2.4% in the fourth quarter of 2020 as long as the temporary lay-off schemes financed by the state (Expedientes de Regulación Temporal de Empleo, “ERTE” in Spanish) remain stable and self-employed people manage to keep their jobs until the end of the year.
For now, ERTEs affect around 730,000 workers in Spain, who mainly work in the hard-hit tourism and services sectors. The tourism sector alone typically accounts for about 15% of Spain’s total GDP, according to official figures.
However, Escrivá predicted that the number of people affected by ERTEs can be reduced and stabilised before the end of the year, to a total of around 677,592 workers – 582,960 of them with their contracts fully suspended and 94,632 only partially, he stressed.
If the government’s estimates are correct, this would mean Spain’s labour market could end 2020 with around 19 million people employed – with people benefiting from the ERTE scheme not being counted as “unemployed”.
Current ERTEs are expected to last until the end of January 2021, but Labour and Social Economy Minister Yolanda Díaz from the left-wing Unidas Podemos /United We Can recently stressed that the coalition government of PSOE and Unidas Podemos is ready to extend them throughout 2021 to help ease the negative impacts of the crisis.
Gloomy outlook for Spain at least until 2023
However, there are few reasons for excessive optimism.
Spain will need to wait at least until 2023 to see a tangible and sound economic recovery and return to pre-pandemic levels, according to a forecast published by the Organisation for Economic Co-operation and Development (OECD) on 2 December.
In its six-monthly outlook report, the OECD is slightly more pessimistic than the Spanish government, which expects a GDP decline of 11.2% this year, while the OECD expects it will shrink by 11.6%.
EU Next Generation Funds – yes, but with conditions and reforms
Spain has secured €140 billion from the EU recovery fund as one the fund’s biggest beneficiaries.
However, it will first need to show it is ready to implement deep structural reforms, including by guaranteeing the pension system’s sustainability, ensuring the number of temporary jobs is reduced and drafting a law to unify the market criteria and avoid fragmentation between regional regulations.
The Spanish government has presented an ambitious reform agenda (“España Puede”/Spain Can) with the aim of radically transforming the economic model, which is excessively dependent on tourism and services. The government’s proposal also suggests a “fast track” procedure for a comprehensive new “green” and digital economic agenda.
[Edited by Daniel Eck]