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, GDP dropped by 18.5 percent (somewhat more than I expected in July). Since forecasts or scenarios are still associated with a lot of uncertainties, I do not publish a detailed economic forecast at the moment. 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, but higher numbers of Covid-19 cases are a serious drag on economic activity, in particular on the tourism sector. For the whole year of 2020, I expect a severe contraction of the economy of around 10 to 12 percent. This will be followed by a recovery of perhaps 7 to 9 percent in 2021. In a more dramatic scenario (for instance, if there is a large second wave of the pandemic), the contraction in 2020 will be at around 14 percent.
As I mentioned above, such forecasts are obviously associated with a high degree of uncertainty. Especially, there is the risk of a large 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.
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