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Economy 16 Apr 2021

BBVA Research maintains its forecasts: the Spanish economy will grow 5.5 percent in 2021 and 7 percent in 2022

Spain’s GDP fell 10.8 percent in 2020 (practically in line with BBVA Research’s prediction of 11 percent) and could grow 5.5 percent in 2021 and seven percent in 2022, according to the latest report Spain Economic Outlook by BBVA Research. It was presented on Thursday by Jorge Sicilia, Director of BBVA Research and Chief Economist at BBVA; Rafael Doménech, the Head of Economic Analysis; and Miguel Cardoso, Chief Economist for Spain. Nevertheless, if the spread of COVID-19 continues to be limited and the government’s vaccination plans move ahead, the research service feels that there could be an upward bias for these forecasts.


Following GDP stagnation in the last quarter of 2020, the Spanish economy has once again contracted in the initial months of 2021 (-0.9 percent compared to the previous quarter) due to the decline observed in health indicators, both in Spain and the rest of the Economic and Monetary Union (EMU). The U.K. leaving the EU; the impact of the Filomena snowstorm; and the increase in infections observed in the second half of December and throughout the month of January created greater uncertainty for families and businesses and also led to the need for a new round of restrictive measures. As a result, according to data from BBVA card expenditures or BBVA points of sale and other demand indicators, household consumption fell between 0.8 percent and 1.5 percent quarterly in the first quarter of 2021. Regarding energy prices, in addition to a transitory impact from the effects of the weather conditions, there was an increase in oil prices that could deduct between 0.8 percent and 1.4 percent altogether from growth in 2021 and 2022.

Nonetheless, economic activity is expected to accelerate in the coming months, which leads BBVA Research to maintain its GDP growth forecasts for 2021 and 2022 at 5.5 percent and 7.0 percent, respectively. “The economy will more or less register elevated rates of growth starting in the second quarter of the year, thanks to an international environment with ambitious demand policies, especially in the U.S.; the arrival of European funds; and progress in the country’s vaccination process,” the new Spain Economic Outlook report says.

Public measures that will support growth

The impact of a new fiscal stimulus package in the U.S. will be above all indirect due to its positive effects on global demand and particularly in the eurozone. This impact, together with the impact of the U.S. temporarily suspending tariffs on Europe, could represent close to 1.2 percentage points of growth throughout the 2021-22 period. 

In Europe, the European Central Bank (ECB) has announced that it will accelerate debt purchases under its Pandemic Emergency Purchase Programme (PEPP) in response to the increase observed in long-term interest rates in the eurozone. This trend reflects the impact the U.S. fiscal stimulus measures have had on global growth and inflation outlooks. Without a comparable response in Europe, and with the uncertainty regarding when resources will start to be injected from the Recovery and Resilience Facility (RRF), which is connected to the Next Generation EU (NGEU) program, “the ECB has decided to send a message regarding its commitment to low interest rates, and once again, prevent fragmentation in the sovereign debt market,” BBVA Research explains. Meanwhile, the easing of fiscal rules in the EMU (for example, the suspension of deficit and growth limits until at least 2023) will allow fiscal policy to continue being expansive. This will make it possible to continue the income support measures for individuals, the reduction of labor costs and the support for business solvency.

On a national level, one of the key measures adopted over the past three months has been the extension of the ERTE temporary layoff scheme and assistance for the self-employed. The research service feels that the social consensus with which this policy was approved is welcome, as well as its foresight and duration, which will provide certainty for the sectors hit the hardest by the crisis, and make it possible to continue maintaining jobs and the productive network, which could reactivate once the service sector starts the final recovery.

In addition, for BBVA Research, it is especially positive that a significant portion of the government’s aid package for SMEs and the self-employed (€11 billion) is concentrated in direct assistance (€7 billion), that it is earmarked and sectoral in nature; and that the sectors included in the ERTE layoff scheme have expanded. It is BBVA Research’s opinion that the aid distribution process, which has been delegated to the regional governments, should be transparent and based on economic criteria, catering to the social profitability of the investment, which should be combined with the agility and urgency required by the circumstances that many companies are facing.

In terms of the restructuring fund included in the aid package (a total of €3 billion), which was designed to support the solvency of viable businesses, BBVA Research underscores the importance of there not being any form of automation for the application of debt restructuring measures. Instead, they should be evaluated by the financial institutions as part of a case-by-case negotiation process.


Jorge Sicilia, Director of BBVA Research and Chief Economist at BBVA.

Risks with an upward bias

Indicators such as total expenditure with BBVA cards already point to greater activity in the month of March, thanks to the lower number of infections since early February, the easing of restrictions in the service sector and the fact that the economy now seems better prepared to face the restrictions at a lower cost (in the first wave, with the same number of deaths, spending fell between 50 and 60 percent compared to the same period the previous year, while in the second and third waves, these reductions barely reached 10 percent and 15 percent year-on-year).

“Everything is contingent on controlling the disease, and therefore on swift, effective and massive vaccinations”

If this emerging recovery continues, and more severe opening and mobility restrictions are not imposed, the growth estimates could be better than estimated,  given the sharp rebound that could occur in private consumption, the increase in construction investments and the acceleration of exports - both goods and services.

  • BBVA Research estimates that approximately €40 billion of savings were generated in 2020 due to non-precautionary reasons (approximately 3.5 percent of GDP). The lower level of uncertainty associated with the disease and the improvement in economic outlooks could lead private consumption to increase 6.1 percent in 2021 and 6.8 percent in 2022.
  • Meanwhile, investment will grow, thanks to household investments in housing and the acceleration of public expenditure associated with the NGEU program over the coming quarters. Thus, investment is expected to rise, reaching 9.2 percent in 2021 and 15.2 percent in 2022.
  • Finally, exports will also significantly contribute to recovery. On the one hand, funds related to the NGEU could reinforce the competitiveness of relevant businesses and sectors and further diversify the destinations of Spanish exports. On the other, regarding the tourism industry, the key lies in making progress with vaccinations, and the regulatory changes that could occur to facilitate individuals’ mobility while maintaining security.

“Everything is contingent on controlling the disease, and therefore on swift, effective and massive vaccinations”

BBVA’s research service stresses that the negative risks continue to lie in vaccination progress, the consequences for employment and the productive network left by the crisis, the implementation of projects related to the NGEU program and the political consensus needed to reach an agreement on the reforms the country needs.  In addition to problems with the availability of vaccines, there is the added issue of confidence in some of them. Moreover, as more time passes in which businesses in the hospitality and retail sector cannot operate, liquidity problems will turn into solvency issues. Furthermore, the cost of maintaining the support that the government has been providing thus far could be greater for public accounts. It was a necessary expense that prevented the destruction of thousands of companies. In fact, BBVA Research estimates that if the measures implemented over the past year had not been adopted, the number of companies in insolvency proceedings would have been 3,000 to 15,000 more in 2020 and 2021 than the number in an environment without the pandemic. Although the extension of the bankruptcy moratorium should help companies to rebalance their balance sheets, BBVA Research feels that it is essential to move forward on the announced bankruptcy reform, in the transposition of the European directive on this issue, and on the agile and efficient use of resources to recapitalize companies.

It is also important to increase the amount allocated to train people who would have a hard time being hired in sectors that will take time to recover to pre-crisis employment levels. Delays in the arrival of resources due to factors unrelated to Spain, or an inefficient and slow execution of funds could reduce the acceleration that is predicted in growth. It is necessary to reach a broad consensus on reforms that reduce unemployment, improve productivity and salaries, and ensure the sustainability of public finances in the medium term. 

Situación España-2-BBVA-Miguel-Cardoso-videoconferencia-

Jorge Sicilia, Director of BBVA Research and Chief Economist at BBVA; Miguel Cardoso, Chief Economist for Spain; and Rafael Doménech, the Head of Economic Analysis.