In April the projection was for a decrease of 13%. For the Eurozone, it now foresees growth in 2021 of 5% and not 10%.
The economic crisis caused by restrictive measures to slow the spread of the coronavirus pandemic could be less harsh for the Eurozone than expected last spring in full confinement in Europe. The latest Unicredit bank report compares its most up-to-date forecasts with those it had made in April and finds substantial differences.
According to his estimate, the economy of the Eurozone will fall this year by 8%, a tremendous figure compared to its worst year so far (2009, when it fell by 2.9%), but much less than 13% drop expected in April. The improvement is generalized with two important exceptions: in the Eurozone, Spain hardly improves its estimates as it passes. Outside of it, neither does the United Kingdom.
Among the major European economies, two clearly improve their forecasts. Germany would go from seeing its economy contract 10% to that contraction being 5.2%. Italy would also contract less, from 15% to 10%. At the same time it improves France, although a little less.
The French economy would no longer fall by 13.8% but by 10.3%. Spain, the fourth largest economy in the euro, has it more crude: from a first forecast of contraction of 15.5% to a forecast revised to 14.5%. The same thing happens, among the European economies that do not use the euro, to the United Kingdom: from a first spring forecast of contraction of 10.5% to one at the beginning of this European autumn of 9.6%. Your review is not even to the point.
The upward revision of the economic forecasts entails a downward revision of the growth of 2021, a smaller rebound than expected. Thus, for the Eurozone Unicredit now foresees a growth in 2021 of 5% and not 10%. That would make the GDP of the Eurozone in December 2021 2.5% lower than at the beginning of the crisis.
Germany would grow 4.8% in 2021 and not 10%. Italy 4.7% and one 9%. France 6% and not 11.6%. Spain 5.2% and not 9.5%. Unicredit calculates that with a 14.5% recession this year and 5.2% growth in 2021, the Spanish economy will start 2022 8% below its pre-crisis level. It would have been the hardest hit by the pandemic of the major European economies.
ERTEs, temporary unemployment programs whereby governments take over much of the salary of employees whose workplaces were temporarily closed due to the pandemic, they have saved millions of jobs. Estimates estimate that at some point in a few weeks in April just among the five major European economies (Germany, the United Kingdom, France, Italy and Spain) there were more than 50 million workers who benefited from these programs.
Without them, Unicredit calculates that the unemployment rate in the Eurozone would have jumped above 15% and in countries like Spain it would have reached 30% at the end of the second quarter. The majority of those employees who benefited from these programs, between 60% and 80% by country, have already returned to work.
Spain, an exception in the Eurozone Unicredit begins by recalling that the Spanish economy suffered one of the worst contractions in the second quarter due to the intensity of the health crisis and the structure of its economy. Its new report now estimates that Spanish GDP grew by 8% in the third quarter but that in this recently released fourth quarter it will only grow 0.2%.
Leading indicators managed by Unicredit, such as the PMI for August, tell you that the activity does not just startr and that “the rise in infections during the summer has prevented Spaniards from returning to a normal lifestyle and has negatively affected international tourism because several governments imposed restrictions on travel to Spain.”
The Spanish economy could see a way out of the crisis in the shape of a ‘W’ instead of ‘V’ shape. The rapid and abrupt fall would be followed by an almost similar rise, and then it would fall again, albeit in a lighter way.
One of the factors that is doing the most damage to the Spanish economy and others in southern Europe such as the Portuguese or the Greek is the almost total collapse of the international tourism sector. The economies that most depend on tourism (and in Europe they are Greece, Spain and Croatia, partly Portugal and Italy) see smaller upward revisions than those of the north, whose economic structure is not so dependent on sectors that involve a lot of mobility and a lot of contact physical.
Unicredit acknowledges that the fall in the incidence of the virus at the beginning of the summer did not translate into growth in tourism, a key sector for the Spanish economy, and that the Spanish Government has once again imposed the closure of Madrid “where the number of infections has increased significantly ”.