Coronavirus Plagues Spanish Economy
The Coronavirus continues to shake economies around the world. A significant proportion of the Spanish GDP is dependent on the tourism sector, and the Coronavirus has certainly impacted the economy.
The media continues to publish headlines about new cases of Coronavirus. The arrival of the virus to the Spanish peninsula is just beginning, and we are already witnessing the speed at which this virus spreads. The high rate of infection – higher than that of common flu – is causing a chain effect, which has already led to the spread of the virus to more than 120 patients in the country.
This situation is causing a great deal of panic. As I like to say, I think that the Coronavirus must be measured from different angles to get an idea of what it really represents. In this way, we can understand the phenomenon both within the health context and economic contexts, which are distant from each other. As much as we are trying to calm the situation on the science and health side, on the economic front, the situation is quite worrying.
As I said, from the health point of view, the main challenges regarding the Coronavirus are lack of knowledge in the first place, as well as a high rate of infection. We are talking about a disease which, as health experts have already explained, behaves like influenza – except the rate of infection. The mortality rate of COVID-19 is quite low unless the affected person simultaneously has previous symptoms and pathologies that could aggravate the infection.
However, it can cause considerable changes to the economy. The Coronavirus, seen from the economic angle, is a big problem for the Spanish economy. For example, tourism income represents 14.8% of the domestic GDP and is adversely affected by this virus.
The high rate of infection has led to the paralysis of the borders, causing a slowdown in the traffic and geographical mobility of people.
If we take into account the stronghold of tourism in the Spanish economy along with the fact that the Easter holiday season is coming up, we get an idea of the potential impact of the Coronavirus on the Spanish economy. We are talking about a month which is usually very beneficial for the tourism sector. The health concerns have made the Spanish economy vulnerable and demand a series of responses that might be beyond the country’s capacity to intervene and act.
The Coronavirus continues to penetrate the Spanish economy. A penetration that not only caused the failure to create nearly 14,000 jobs during the Mobile World Congress but will also have its impact on a larger number of jobs, as well as on consumption. And hoteliers have warned of this. The Spanish economy, besides being caught up in this problem, is also going through a confusing scenario with a considerable slowdown in growth.
Tourism in Spain already contributes over 150 billion euros. This sector has been consolidated in recent years as one of the main economic engines in the country. Its high capacity to generate employment and income has made it a strategic sector. Moreover, this Easter season was absolutely crucial for the sector. This week, the tourist footfall is much higher than usual. We are talking about a week that accounts for 10% of the annual tourist activity in the country, as well as a high percentage of the income.
Italy is facing the same problem, and they are waiting in despair for a technical recession following a possible contraction in the first quarter. The landscape for Spain is just as worrying. Tourism in Italy contributes 6% of the GDP. The country is taking steps to mitigate the negative impact on this sector. Spain’s tourism contribution to its GDP is over twice that of Italy at 14.6%. It should show at least the same eagerness as Italy when it comes to finding solutions not only to the loss of income but the economic slowdown in the country.
According to Goldman Sachs, while the International Monetary Fund (IMF) and the Spanish government were forecasting growth in the range of 1.5-1.6%, the effect of the Coronavirus and its impact on the economy could cause an adjustment that could bring growth for the Spanish economy to 1.3%. There will be more intense economic deceleration the growths much lower than expected, in line with the expected growths for the European average.
However, in a scenario like the current one, even exports can no longer save the situation for the country. The year 2019 closed with a growth rate for the country of 2%. This growth rate was recorded after accounting for this improved performance of the Spanish economy with regard to its foreign sector. However, with a totally blocked trade scenario, the foreign sector and the trade surplus are not enough to resolve the situation. Therefore, we must begin to move forward, as time is against us, and the effects of the virus on the economy are spreading faster than on society.