The Spanish Economy: Dramatic recession in the spring, but hopefully we will see a strong rebound

Spain has been especially hard hit by the Covid-19 pandemic and the lockdown of the economy was particularly strict. As elsewhere, travel, tourism, hospitality, entertainment and many other sectors of the economy were hard hit. In the first quarter of this year, gross domestic product (GDP) contracted by 5.2 percent. In the second quarter, I expect a drop in GDP of perhaps 12 to 16 percent. Since forecasts or scenarios are associated with very high levels of uncertainty at the moment, I do not publish a detailed economic forecast. I am relatively optimistic as regards the short-term recovery in the summer and autumn, but relatively pessimistic as to economic developments in the coming years (I also hold this view for several other countries). The economic recovery in Spain is under way during this summer. However, for the whole year of 2020, I expect a severe contraction of the economy of around 11 to 13 percent. This will be followed by a recovery of around 8 percent in 2021. In a more dramatic scenario (for instance, if there is a second wave of the pandemic), the contraction in 2020 will be at around 15 percent. As I mentioned above, such forecasts are obviously associated with a high degree of uncertainty. Especially, there is the risk of a second wave of the pandemic. At the global scale, worldwide tensions could increase – especially between the United States and China. And at the European level, it is still not clear how exactly Brexit will occur and whether it will cause additional risks to the Spanish economy – at least in the short term.

While I use several models in my forecasts, my published numbers are also strongly influenced by my personal experience and judgment.