Spain cuts 2021 growth forecast to 6.5% after first-quarter contraction
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[April 09, 2021] By
Belén Carreño and Nathan Allen
MADRID (Reuters) - Spain's government
slashed its forecast for this year's economic recovery on Friday to
reflect a COVID-induced contraction in the first quarter and expected
delays to the arrival of EU rescue funds.
The government now expects gross domestic product to grow 6.5% in 2021,
down from a previous estimated range of 7.2%-9.8%, Economy Minister
Nadia Calvino told a news conference.
With its economy - the euro zone's fourth-largest - highly dependent on
foreign tourism, Spain suffered more than most developed countries
during the first year of the pandemic, posting a record contraction of
10.8% in 2020.
A third wave of the coronavirus hit the country in the first two months
of the year, and a massive snowstorm also disrupted activity in much of
Spain in January.
"The recovery is delayed by one quarter," Calvino said, adding however
that the government expected a strong increase in the second half of
2021.
The Bank of Spain had already lowered its 2021 growth forecast for
similar reasons to 6%, while the International Monetary Fund expects a
6.4% expansion.
As global vaccination efforts ramp up, the economy should expand by 7%
in 2022, with output recovering to pre-pandemic levels by the end of
that year, Calvino said, before slowing down to 3.5% in 2023 and 2.1% in
2024.
Unemployment should stabilise at 15% this year and slowly recede through
2024, thanks to the cushioning effect of the ERTE government furlough
scheme, which should keep jobless figures well below the record high of
27% seen in the last financial crisis.
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Spanish Economy Minister Nadia Calvino is welcomed by German Finance
Minister Olaf Scholz (not pictured) at the Informal Meeting of
Ministers for Economics and Financial Affairs in Berlin, Germany,
September 11, 2020. REUTERS/Hannibal Hanschke/Pool/File Photo
The disbursement of 140 billion euros ($166.40 billion) in European Union
recovery funds over the next three years - around half in grants - will further
boost the economy, but most of the impact will not be felt until 2022.
Calvino had estimated last year that the funds would lift growth to 9.8% in
2021. The 6.5% growth forecast for 2021 includes the effects of the funds, she
said.
Madrid and other European capitals have complained about the complexity getting
European Commission approval for investment projects using the funds.
Prime Minister Pedro Sanchez will present Spain's final recovery plan on
Wednesday, one of the earliest countries in submitting it.
($1 = 0.8413 euros)
(Reporting by Inti Landauro, Jesús Aguado, Nathan Allen and Belen Carreno;
Editing by Andrei Khalip and Raissa Kasolowsky)
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