The central bank of Spain is more pessimistic about the recovery of the Spanish economy, a forecast shows on Wednesday. The recovery was hit at the end of July, as the Spanish government had to impose restrictions due to the increasing number of corona virus infections.
Banco de España expects the Spanish economy to shrink by 10.5 percent at best and 12.6 percent at worst. This makes the picture of the central bank more gloomy than three months ago, when it outlined a bandwidth of -9 percent to -11.6 percent.
“The 2020 slowdown will automatically lead to a worse starting point for growth in 2021,” chief economist Oscar Arce said in a statement. The central bank therefore expects growth of 4.1 to 7.3 percent next year. Previously, a plus of 9.1 percent was assumed.
In 2022, economic growth is expected to level off again to 1.9 to 3.3 percent. This means that the size of the Spanish economy in 2022 will be about 6 percent below the level before the corona crisis.
Due to the disappointing recovery, unemployment in the Southern European country will rise sharply in the coming years. Currently, 15.8 percent of the labor force is unemployed. The percentage will rise to 22.1 percent next year in the worst case. This means that the unemployment rate is slowly heading towards the lowest point of the Spanish labor market: in the first quarter of 2013, 26.9 percent of the Spanish labor force was unemployed.