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The Bank of Spain Revises Down its Forecast for GDP to -15% due to the Economy’s Dependence on Tourism and SMEs

The Bank of Spain has revised down its forecast for the impact of Covid 19 on the economy. It now predicts a contraction of between 9% and 15% this year after a fall of 5.2% during the first quarter. Unemployment is expected to leap to 24.7 % in 2021, a rate not seen since 2014.

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The Bank of Spain is considering three scenarios for the Spanish economy and none are optimistic. In this vein, the ‘softest’ forecast sees Spain’s GDP falling by 9% in 2020 under an early recovery scenario, while the most pessimistic alternative predicts that GDP will fall by as much as 15.1%, in the event that additional outbreaks of the infection force further “strict lockdowns” in the future.

The Bank of Spain estimates that the drop in GDP in Spain will be around 3 percentage points higher than the average for the eurozone, although, on the upside, it believes that the recovery will be more intense in Spain than in the economies of its European partners. Those are the macroeconomic scenarios submitted by the Bank of Spain that the ECB used to prepare its estimates for the eurozone, which were published last Thursday.

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