The Independent Authority for Fiscal Responsibility (AIReF) lowers its forecasts for the Spanish economy with an estimated growth for this year of 6.6%. A quite remarkable cut when compared to the central scenario of 8.2% that the agency handled last fall. The reason? The high uncertainty that still exists about three key factors for recovery: the rate of vaccination to stop the health crisis, tourism and the arrival of European funds.
“The great unknown is what will happen in the fourth quarter of the year, because the indicators that we handle now, such as the demand for electricity, anticipate a brake on the recovery in the month of March,” they explain from the agency. A brake that will only be saved if Europe manages to meet the vaccination objectives that, with the stoppage due to doubts about the Astrazeneca doses, seem difficult to achieve.
“The pandemic is far from being controlled, with new restrictions on mobility in some countries and a vaccination process that has progressed at a slower rate than we would like,” they explain from the agency. “Our assumption is that the process will be accelerated and, throughout 2021, we will return to normality, but full recovery will not occur until 2022,” they insist.
From here, obstacles to growth line up like the ‘tail-biting whiting’. Without a vaccine, the recovery of tourism, key to the Spanish economy, also seems distant. In its Report on the Initial Budgets of Public Administrations (Public Administrations) for 2021, in which it updates its macroeconomic and fiscal estimates, AIReF anticipates new waves in the short term that will imply, as is already happening, new restrictions.
For this reason, the agency does not believe that the sector will recover levels prior to the crisis until 2022. Its estimates are more optimistic than those of the World Tourism Organization (UNWTO), but they warn of the hard months that remain to come. His estimate is that the level of international tourism activity this year will barely reach 30% or 40% compared to a normal summer season. And the forecast is that by the end of 2021 that percentage will still be between 60% and 70%.
Added to this explosive health cocktail is the third factor that has influenced AIReF’s decision to lower its growth estimate: the delay in the arrival of European funds. The institution has notably lowered the expected impact of the Recovery, Transformation and Resilience Plan on Spanish GDP to 1.6 points, from the previous 2.7 points.
AIReF sources indicate that, in these new forecasts, they have not taken into account the possible risk of execution of the funds, but the delay in their effective arrival. In fact, they remain optimistic about the multiplier impact of the plan. But in their previous forecasts, they counted on the millionaire European program to be available in the first moments of 2021, an event that they now delay to the second half of the year.
The organism recognizes that the decision of the German Justice to paralyze the process of the funds will also delay somewhat their arrival in the countries, but they do not believe that this fact is decisive. “There may be some delay, but the money will come forward,” they indicate, with which the effect on the recovery will be noticeable as early as 2022.
On the other hand, AIReF also estimates a deficit of 7.6% of GDP in 2021 in its central scenario, reducing its previous forecast by just over three tenths.
Although the agency foresees that the State’s income will grow by 5.8% in 2021, one of the big surprises has come with the collection estimate of the Government’s ‘anti-fraud plan’. Specifically, of the 828 million that the Ministry of Finance anticipates, AIReF now considers that these measures will barely contribute some 217 million euros to the public coffers. “The parliamentary procedure is not progressing significantly, so its time in force will be reduced and, therefore, its effects for this 2021”, indicate sources from AIReF.
Another of the data that they have calculated from the agency responds to the ‘revenue losses’ that the VAT reduction of surgical masks may entail. According to his calculations, the measure would imply not entering this year about 353 million euros, a figure that increases to 538 million euros if all the discounts applied to different sanitary material are taken into account.
Faced with this scenario, the institution continues to detect “high risks” for the sustainability of public accounts and points out the possibility that the crisis will have permanent effects on the productive fabric. In this context, they insist on the need to design a credible medium-term fiscal strategy and realistic that guarantees the sustainability of public finances.
They have also requested more information from the administrations, in a context of suspension of the fiscal rules, considering it advisable to «adjust the debt of the communities to the real financing needs and promote follow-up actions of the main fiscal indicators of the municipalities by part of the guardianship bodies ».
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