Brussels cuts growth forecasts as Spain’s economy lags its neighbors



The European Commission has lowered its Spanish growth forecast this year, as the country’s recovery from the COVID-19 pandemic lags behind other European countries.

The commission said on Thursday that it estimated the increase in Spain’s gross domestic product would be 4.6% this year and 5.5% next year, almost two points lower than the previous forecast of 6, 5% this year and 7% in 2022.

Spain has been the European economy hardest hit by COVID-19, and its recovery has been slower than that of its mainland neighbors.

At the end of the third quarter, Italy’s GDP was 1.4% below its level at the end of 2019.

Germany reduced the gap to 1.1% from pre-pandemic levels, and France reduced the gap to just 0.1%.

However, in Spain – the euro area’s fourth-largest economy – GDP is 6.6% below 2019 levels.

Unemployment remains stubbornly high at 14.9%, while youth unemployment, for those under 24, is the worst in Europe at 30.6%.

Inflation climbed to 5.5% from October 2020, the highest figure since 1992, when the peseta was associated with the German deutschmark. Soaring energy costs, along with the rising cost of summer vacations, have pushed up inflation, analysts said. Core inflation stood at 1.4%.

The country’s budget deficit is expected to reach 8.4% by the end of the year, well above the European Union’s target of 3%, which has been eased until 2022.

The Spanish coalition government is banking on the arrival of EU stimulus funds to revive the economy.

As part of the 2022 budget, Spain plans to spend a record $ 46 billion in public funds on investments that analysts say will boost growth and reduce the deficit to 5% in 2022 and 4% in 2023 .

Nadia Calviño, Spain’s economy minister, told a meeting of European finance ministers on Tuesday that the country was on track to reduce its deficit.

“We have adopted a cautious attitude when preparing budgets for 2021 and also for 2022 so that in fact tax revenues allow us, even in a not so positive macroeconomic situation, to reduce the public deficit in 2022”, she declared. .

Macroeconomics aside, in the streets, some are still waiting for the recovery after the pandemic.

People collect food donated by volunteers and members of the Catholic congregation of the Servants of Jesus in Madrid, Spain, October 8, 2020.

Oscar Díaz, managing director of Mundopalet, a company that makes pallets for transporting goods, is a worried man. He told VOA on Thursday that he had had to shut down half of his production lines at his company’s factory in Toledo, 90 kilometers south of Madrid.

The company, which employs 100 people, is struggling to find enough wood to manufacture its products, as countries like Brazil, China and Lithuania raised prices from $ 1,382 per truck earlier this year to 10 $ 362.

Major economies such as the United States, China and Germany have also increased their demand for wood as their economies begin to recover from the pandemic, pushing prices further up.

“Yes, I am worried. Some of our clients’ businesses have ceased to operate. We have stopped work on 10 of our 20 production lines. We are in danger, ”Díaz told VOA from his factory.

Mundopalet is by far not the only one, as Spanish companies grapple with supply chain issues typical of other sectors, from winegrowers to farmers.

To make matters worse, Spanish truck drivers plan to strike for three days the week before Christmas, Spain’s National Road Transport Committee said on Wednesday.

As one of the busiest times of the year approaches, drivers threaten to disrupt supply chains if the Spanish government does not meet its demands, including safer rest areas and the ban to require truckers to load and unload goods.

However, analysts say the health of the Spanish labor market shows that the effects of the pandemic are fading.

The number of employed workers increased in the third quarter of 2021 by 359,300 workers, according to the National Institute of Statistics, bringing the total to more than 20 million, the first time this figure has been reached since 2008, when the financial crisis. world has started.

During the same summer period, the ranks of the unemployed fell by 3.59%, according to data from the institute.

Javier Díaz, economist at IESE business school in Madrid, said Spain has suffered more from the pandemic than other European countries due to its dependence on tourism and the automotive sector, which is struggling due to a global chip shortage and declining consumer demand.

“What is important to look at is not the level of unemployment but employment. It shows that the economy is not that bad, ”he told VOA.

Spanish inflation has increased due to the global rise in fuel and energy prices and a lack of demand in key sectors such as tourism and the auto industry, which are still recovering from the shock of COVID -19, he said.

“Spain is not really in trouble. Growth of between 6% and 4% this year is actually better than it was before the pandemic, ”Díaz said.


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