Spain to reduce 2021 economic growth forecast

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Calviño says Spain will reduce economic growth forecast for 2021. Image: La Moncloa - Gobierno de España on Flickr under

MADRID – A bad start to the year leads Spain’s second vice-president to lower the economic growth forecast for 2021. She does, however, expect “a very strong rebound” in the second half of the year.

Despite the bad start to 2021, the second vice president expressed her confidence that Spain will register “a very strong rebound” in the second half of the year due to the vaccination campaign and the end of the restrictions.

The Vice President of Economic Affairs, Nadia Calviño, confirmed this Thursday the Government will reduce its economic growth forecast for 2021. The current forecasts show an advance in GDP of 7.2% that could reach 9.8% with the boost of European funds.

In an interview on Bloomberg TV, Calviño said “It could be somewhat lower.”  She explained the review will be carried out due to the impact of the third wave of the pandemic on the economy in the first three months of the year.

“We left behind a tough first quarter, which is the main reason why we are going to lower our forecast for this year, in which we anticipated growth of around 7% and it may be smaller,” explained Calviño.

Strong rebound expected

However, Calviño expressed confidence that Spain will register “a very strong rebound” in the second half of the year.  “We think the second quarter will be a transitional quarter and that we will have a very strong rebound in the second half of the year,” she added.

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She was also positive concerning the IMF’s upward revision, to 6.4% of GDP for the current year. “That is something that everyone expects,” she said.

In addition, the “change in the dynamics of tourism” after the state of alarm ends on May 9 will also influence the rebound, according to Calviño. The vice president was “quite optimistic”, expecting that in summer a “good part” of the European population will be vaccinated.

Last week, Calviño recognised factors that would lead to a downward revision. However, she also pointed out there are positive indicators such as the world recovery and stimulus programmes. These would have a favourable impact on Spain, particularly later in the year.

Disagrees with IMF over unemployment

The IMF’s forecasts, whilst positive for economic growth, are far more negative when it comes to unemployment. The IMF warns unemployment would continue in 2026 above pre-pandemic levels.

Calviño disagrees with this forecast saying Spain will be able to reduce unemployment faster. “I do not agree with the approximation made by the IMF in its unemployment rate forecasts for Spain. Thanks to the measures adopted in March last year, we have had a very different dynamics in the labour market than previous crises. We think we will be able to reduce the unemployment rate faster than the IMF anticipates,” she argued.

However, she did admit that high unemployment in Spain has hampered the country’s growth for decades. Calviño stressed the recovery plan represents a good opportunity to change some elements and undertake an ambitious labour reform.

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