The Bank of Spain appeases Sánchez's enthusiasm: "The potency of the recovery is still uncertain"

The agency warns that vaccination, the rate of spending by families and the reactivation of tourism will condition the economic evolution. And on all these aspects, uncertainties weigh

The President of the Government, Pedro Snchez, yesterday in Congress.EFE

Pedro Sánchez announced yesterday in Congress that “the Spanish economy is about to re-launch”, and that the second quarter will be “frankly positive due to the recovery.” An irrepressible optimism that, however, is not shared by the Bank of Spain since, although it does not doubt that there will be the rebound that the Prime Minister hopes for, it also warns that “the power of the recovery is still uncertain“.

The warning corresponds to Scar Arce, Director General of Economics and Statistics of the BdE and, therefore, head of the most powerful study center in Spain. And in his analysis, he points out that the speed in the vaccination process, the rate at which families release accumulated savings and the recovery of tourism will be key factors.

“In the shortest term, we remain highly dependent on the evolution of the disease and we continue to depend very much on the progress of vaccination“, explains the head of the Bank of Spain, an organization that today published its Annual report. The Government maintains that 70% of the population will be vaccinated at the end of summer, a milestone that many voices have pointed out that it seems very complicated. From the BdE it is estimated that the pace has “accelerated” in an evident way in recent weeks and that “of course” that level can be reached. But only “if there are no setbacks”, they add, something that cannot be ruled out.

“The economic evolution of the coming quarters will be further influenced by the rate at which the savings stock accumulated by Spanish families will be reduced in 2020,” continues the supervisor. Households have a very significant savings pool that they have accumulated since the beginning of the pandemic and, “as the evolution of the pandemic improves and uncertainty is reduced”, it is expected that they will make use of these resources “and boost consumption and activityBut for this they have to have a certain security and, of course, a freedom of spending that they have not enjoyed until now.

And to all this must be added that “the path of reactivation of international tourism, about which there is considerable uncertainty“.” There is considerable uncertainty, “says the Bank of Spain,” regarding the speed at which the tourism sector could recover, “since this” depends not only on the evolution of the health crisis and the pace of progress of the vaccination process -both in Spain and on a global scale-, but also of the magnitude of the persistent changes that the pandemic may have caused in the population’s demand for this type of services. ”

The NGEU program

The Bank of Spain does not forget at all the impact that the Next Generation EU (NGEU) will have, that is, projects linked to European funds. Its development should begin in that second semester that the Government expects to be very positive, but the Ministry of Economy itself has already recognized that a good part of the impact that is initially expected for 2021 will actually be collected in 2022.

In addition, there are not a few concerns about Spain’s real capacity to take advantage of and absorb the vast amount of funds as much as possible. The BdE has already recorded in previous documents the unfortunate result of Plan-E, and in this document it makes numerous recommendations so that “the best possible use of the program” is carried out. For example administrative procedures are eased; that unnecessary regulatory procedures be limited; or that there is a guide that clearly and uniformly defines the criteria for selecting projects. This last point is directly related to the complaints that many economists and experts have already made: that not all companies, despite being innovative, have access to the program since they do not have direct relations with the Government.

Fiscal policy

And as is customary in practically all BdE reports, a call is made to “process of cleaning up public accounts that allows rebuilding the margins of fiscal action“In fact, it is not only common in the Bank of Spain but also the Independent Authority for Fiscal Responsibility (AIReF) put in evidence, this week, that Spain is the only major European economy that does not detail what its plan to contain the debt, and that, in addition to purely economic reasons, is also essential to “strengthen the credibility” of the country.

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