MADRID – The International Monetary Fund (IMF) has revised the forecast for the economic recovery in Spain in a positive way. After Spain was ranked among the countries with the greatest economic recession, 6.4% growth is now expected for 2022.
That is half a percent more than the forecast made by the IMF in January this year. At the time, it was assumed that the gross domestic product (GDP) would increase by 4.7% in 2022. If the IMF is correct, Spain will be back to pre-corona pandemic levels by 2023.
Slow unemployment decline
However, the bad news is that Spain’s unemployment rate is the highest in the entire Eurozone at 16.8%. This percentage is not expected to fall below 15.8% in 2022. Furthermore, this means Spain has an unemployment rate four times that of Germany. Last February, unemployment in Spain rose by 2.5 percentage points, making the country the second largest increase ever recorded in the EU.
Economic recovery and growth
In the prognosis for economic recovery, the IMF assumes an effective vaccination program and a high willingness to vaccinate among the population. Although the course of the pandemic remains unpredictable, a way out of this crisis seems to be getting closer, according to the monetary fund. This positive forecast is shared by the Banco de España, which estimates this year’s economic growth at 6%, and the OECD, which keeps it at 5.7%. Only the forecast of the Spanish prime minister himself is well above that at 7% in 2021.
First focus on the way out of crisis
According to the IMF, the primary focus should be on escaping this crisis. Thus giving priority to healthcare costs, providing targeted tax support and pursuing a flexible financial policy. Only then can the focus be broadened to longer-term economic recovery with larger government investments.
As far as the labour market is concerned, the IMF foresees a recovery that will not eventually return to the old situation. To compensate for the job losses, the Spanish government will have to invest in training and retraining for workers. In addition, subsidies for employers must ensure that more employees can be contracted.
Importance of government mechanisms
Finally, the IMF emphasises the importance of ERTE temporary unemployment schemes. This instrument protects a large number of workers from the most affected sectors and does not make unemployment even more disastrous.