While the world improves its forecasts, Spain worsens them

If 2020 was the year of the pandemic, 2021 is the year of vaccination. And after the collapse of the global economy last year (-3.5%), For this year, strong growth is expected to compensate for the economic decline and to recover lost time.

It is a complex year in which growth estimates can be altered by various catalysts. Let’s think that if more success is achieved with vaccines we could return to normality lost, but in the assumption of a slow implementation of the vaccine, the mutations of the virus and the premature withdrawal of political support can worsen results.

In the financial aspect, we must bear in mind if the downside risks materialize or we could see a tightening of financial conditions that could amplify the recession, at a time when public and private debt is at record levels worldwide.

Debt

Despite everything, for now the world has revised its growth expectations upwards in the IMF report for January versus October estimates. But, in the specific case of Spain, the expected rebound has been revised … down.

The world economy The world economy is forecast to grow by 5.5% in 2021 and 4.2% in 2022. The forecast for 2021 has been revised up by 0.3 percentage points from the previous forecast. For Spain, after being the developed economy that fell the most in 2020 (-11%), this year we are expected to grow by 5.9%, which would imply a loss of dynamism of 1.3 percentage points compared to the previous estimate.

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Of course, growing more than the world is good news, although this is given by the rebound after a sinking not seen in the historical series. The problem is that at the moment of growth, our expectations are seriously damaged and revised downwards. There really is a serious discrepancy between the growth forecasts: The Spanish Government believes that we will see a growth of 9.8%, almost four points of dynamism compared to the IMF forecast. And worst of all is that their forecasts are the basis for executing the Budgets.

The immediate question we should ask ourselves is Why is it that while the world improves its expectations, in Spain they deteriorate?

Spain diverges from the world due to their differences in behavior linked to the level of contagion, the flexibility and adaptability of economic activity, the pre-existing trends and the structural rigidities prior to the entry into the crisis.

We are among the worst countries to have managed the pandemic. Today we face 1,323.26 deaths per million inhabitants (the thirteenth country with the worst ratio), but we are the developed economy that has fallen the most (-11%), a mix that reveals the failure of the government’s management.

And we are not standing out for a fast vaccination rate. Israel would have vaccinated 66% of the population (the country that has vaccinated the most relative to the population), the United Kingdom 19%, the United States 13% and, in the case of Spain, we only carry 4.50%. This means that, at the health level, being the most affected we are not adapting to the virus.

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If in terms of health we are not fighting it as it should, or the economy is restructured to adapt to the reality of various waves and partial or total closures, or there will be no way to refloat the economy and growth rates of economic activity will be affected. And this point is especially important because we have resumed the upward path of debt, with a relative measure of 362% of GDP.

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At the level of contagion, the month of January that we have left behind has been the worst of the entire pandemic. Infections have totaled 863,961 and the cumulative incidence has tripled to 865.6. All this has led us to the number of COVID-19 cases exceeding 2.8 million.

And, consequently, the advance data has been bad. The general index of business activity for January, which is based on a single question in which companies are asked to comment on the evolution of their activity dropped sharply to 41.7 in January, compared to December 48. Dropping below the 50 mark for the sixth consecutive month.

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Manufacturing production also declined as the sector, like the service economy, has been hampered by a lack of demand related to the pandemic and the temporary effects of Storm Filomena.

In fact, startup volumes declined for the sixth month in a row, with simultaneous declines in new jobs in the manufacturing and service economy. Therefore, different organizations are pointing to a 0.8% drop in GDP in the first quarter of 2021 (AIReF data).


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