MADRID: IMF adjusts forecast economic growth positively except for the Eurozone. Spain shows the largest economic contraction in all the Eurozone.
The International Monetary Fund (IMF) has positively revised its outlook for global economic growth with the exception of the Eurozone and particularly Spain.
The IMF, the UN organization that oversees the stability of the international monetary system, expects the Spanish economy to report a contraction of 11% in 2020. It also forecasts the growth in 2021 will be 5.9%. The IMF had previously forecast economic growth for 2021 of 7.2% of the gross domestic product (GDP). However, the Spanish government is sticking to the more positive forecast, expecting the national economy to increase 7% in 2021.
Vulnerable economy in a pandemic situation
According to IMF chief economist Gita Gopinath, Spain is lagging due to an economy that has proven vulnerable in a pandemic situation. Therefore, it is less likely to recover from the consequences. In European countries where tourism makes up a significant part of the GDP, the economic impact is greater than in countries such as China and the United States.
Spain is a tourism leader with a sector that accounts for 14% of GDP. With a relatively large share of SMEs, it is more difficult for Spain to recover from this crisis than for those countries where large companies drive the economy. In addition, the effects of Covid-19 on public health in Spain should not be underestimated. After Belgium, Italy, England and America, Spain is the developed country with the most corona deaths in relation to population.
Biggest economic contraction in Spain
According to the IMF, the economic contraction within the Eurozone is the largest in Spain at 11.1%. However, it is less dramatic than the 12.8% initially forecast by the IMF. Worldwide there was an economic contraction of 3.5 percent. That is the highest percentage in peacetime since the economic recession of the 1930s.
European vaccination campaign is progressing slowly
In the entire Eurozone, the economic recovery will be affected by the slow vaccination efforts. Even Spain, which is the most advanced of all major EU member states regarding vaccination, has vaccinated only 2.7% of the population to date, according to Bloomberg news agency. In comparison, the United States vaccination rate is 7.1% and the United Kingdom it is even higher at 11%.
In contrast to Europe, the IMF has revised upward expectations for economic growth in Japan and the United States. US President Joe Biden’s $1.9 trillion bailout plan presented last week will positively impact further the 2021 outlook.