Pre-crisis GDP levels will recover in early 2022
MADRID, 9 (EUROPA PRESS)
The Government foresees the creation of some 15 jobs for every million euros invested in the Recovery, Transformation and Resilience Plan, which will entail the investment of 72,000 million euros between 2021 and 2023, with the creation of up to 880,000 jobs in the period , some 80,000 more jobs than announced by the Prime Minister, Pedro Sánchez, last Wednesday.
This is clear from the Government’s report on the situation of the Spanish economy, collected by Europa Press and which accompanies the agreement of the Council of Ministers to establish the limit of non-financial spending of the State Budget for 2021, known as the ‘spending ceiling’, which increased by 53.7%, to 196,097 million euros, including extraordinary transfers to the Autonomous Communities (13,486 million) and Social Security (18,396 million) and part of European funds (27,436 million).
The new macroeconomic picture of the Government foresees a fall in GDP of 11.2% this year, with an unemployment rate of 17.1%, and contemplates a growth of 7.2% in 2021, which could reach 9.8% taking into account European funds, together with an unemployment rate of 16.9%. The public deficit will climb to 11.3% of GDP this year and the deficit reference rate is 7.7% in 2021, with an estimate that public debt will climb to 118% of GDP this year.
The Executive details that the set of plans and reforms implemented has an “eminently transformative orientation of the productive and social fabric”, with a long-term vocation, taking the potential growth of GDP above 2%.
The long-term impact of the plan for the year 2030 may involve an increase in the potential GDP of the economy of between 4 and 5 tenths, which would allow it to be above 2%, according to the Government’s forecasts. Digital plans will account for 50% of the improvement.
Additionally, it estimates that it will have a short-term impact as a boost to demand through the injection of public funds, which will allow the recovery of the pre-Covid growth path by the end of 2023.
In parallel to the absorption of the funds, the Plan will suppose a “significant boost for the economy,” says the Executive, since it calculates that the simulated measures will allow a faster recovery of pre-crisis GDP levels in early 2022.
The forecasts contemplate that the GDP will be 6 percentage points above the level that would have been reached in 2023 without the Plan. The multiplier for the year 2021 is 1.2, although it is very heterogeneous between the different plans, especially digital ones and investment in R&D, with multipliers around 2.
In aggregate terms, the employment generated by the plan could reach 880,000 jobs after three years, which would be equivalent to about 15 jobs for every million euros invested.
This estimate is higher than the 800,000 jobs predicted by the Prime Minister, Pedro Sánchez, last Wednesday during the presentation of the plan, although the Vice President of the Government, Nadia Calviño, already said that the estimate was “prudent.”
A LARGE PART OF THE POPULATION VACCINATED IN THE SECOND HALF OF 2021
Similarly, the report points out that expectations about the production of an effective vaccine have been improving “exponentially” in recent months, with more than 300 projects underway around the world, including 9 in phase 3, prior to mass production, adding that the World Health Organization (WHO) hopes that widespread vaccination could begin as of 2021.
Therefore, the Government maintains that if it is not delayed beyond that date, “a large part of the population could be vaccinated throughout the second half of 2021, allowing a return to normality.”
On the contrary, it warns that if there are unforeseen difficulties in the development of effective vaccines, the period of coexistence with the virus “should be prolonged, maintaining certain restrictions, although localized and sporadic, that would limit the levels of use of productive capacity, particularly in some sectors of special relevance for Spain, such as tourism, hospitality or commerce “.
RISKS: PRODUCTIVE SPECIALIZATION, LABOR DUALITY AND BREXIT
The report also warns that the productive specialization of the economy and the duality of the Spanish labor market may pose an “additional risk” in the event of prolonging the health ‘shock’ beyond what was initially planned, which would lead to health problems. business solvency and hysteresis.
However, it ensures that these risks are being tackled with the measures adopted in recent months within the framework of the shock plan and the recovery plan and will be addressed in the coming quarters with the structural measures and investments included in the Recovery Plan. and Resilience.
Finally, it also refers to the possibility of a no-deal Brexit as a risk, which “could worsen the growth prospects of the Spanish economy for the next few years”, as it is an “important economic partner.”
Although from a commercial point of view, Spain’s exposure is somewhat lower than the average for the euro area, constituting just over 3% of GDP, the United Kingdom is currently the fifth destination for Spanish exports and the main emitter of tourists to Spain.
On a financial level, Spain’s exposure to the British country is somewhat lower than the euro zone average, although it is also “very significant.” Spanish foreign assets and liabilities vis-à-vis the United Kingdom amounted to 16.5% and 17.2% of GDP in 2019, respectively.