The Spanish economy will be one of the hardest hit by the Covid-19 crisis, according to the six-monthly outlook report published today by the Organisation for Economic Co-operation and Development (OECD).
IT states the economy in Spain will see a fall in gross domestic product (GDP) of 14.4 per cent in 2020 should there be a second coronavirus outbreak later in the year.
Or 11.1 per cent assuming the pandemic subsides by the summer.
This is similar to the UK, with 11.5 per cent, followed by France with a drop of 11.4. These three economies would suffer the most if there is no second spike in infections.
However, should there be an upturn, Spain would be the hardest hit.
Its 14.4 per cent fall would be closely followed by France, with 14.1 per cent, and the UK, with 14 per cent.
In the case of Spain, the report reads: “The subsequent recovery in 2021 will be slower in the former case, at 5 per cent, compared to the rebound of 7.5 per cent in the single-hit scenario, given more persistent effects on labour markets and the financial situation of firms and households.
“In both scenarios, the fall in domestic demand, due to job destruction and the shutdown of activity, is the key driver of the contraction. The drop in external demand, especially in tourism services, will also weigh very strongly on the economy in 2020.”
The government has taken significant measures to support employment and provide liquidity to the economy, and the OECD says expansion of hospital and testing capacities and the rapid identification of infected people will be crucial to prevent further outbreaks.
“As the recovery commences, the use of short-time work schemes will need to become well-targeted and gradually replaced with labour market policies to help firms and workers in sectors with persistent negative effects shift into activities with better medium-term prospects.
Liquidity support should also be targeted to solvent firms with cash-flow problems, advises OECD.