Spain Can’t Fix Its Vulnerable Economy After Coronavirus
The situation for the Spanish economy is no less risky than for Italy. However, the government has not yet put forward the emergency plan that the IMF is asking for
Spanish – Spain is confronting the coronavirus and has completely forgotten its economy. The Spanish economy is currently engaged in the process of containing a pandemic, which is not under control, at least, if we calculate the potential costs of the outbreak. The number of people affected in Spain is still rising, while the risks of possible contagion in the economy are increasing.
In the current scenario, the European economy is trying to remedy the impossibility of applying containment measures resulting from monetary policy. The limited room for maneuver presented by the EU body prevents the European economy from adopting measures similar to those adopted by other countries, such as the United States. On the other hand, this situation should lead us to consider the problem of postponing a withdrawal of low rates, which increases the room for maneuver, as well as the government making its own decisions.
However, despite Sánchez’s promises, these measures are still not forthcoming. While in Europe, the implementation of measures by the respective governments of the countries that make up the EU bloc has already begun, Spain has not yet taken the necessary steps. Or at least that is how it has been reflected by our politicians, who are still more concerned with politicizing the feminist movement than containing the viral outbreak.
This landscape is not encouraging investors and agencies to relax, and the International Monetary Fund (IMF) is especially concerned. Although the government has yet to issue a statement, the multilateral organization has already urged governments to adopt fiscal, financial, and monetary measures to try to stop the impact of the Coronavirus on the world economy. These impacts are generating great losses in certain sectors.
In fact, the OECD was already readjusting its growth forecasts for world GDP this very week. While the forecasts previously showed a growth close to 2% for the year 2020. Finally, considering the adjustment caused by the discount of the impact of the Coronavirus, it has been set at 1.4%. A reduction in growth that, nevertheless, is not definitive because the situation is still very unpredictable.
The viral outbreak is now affecting more and more people. This has raised the IMF’s concern that the effects of the Coronavirus could damage the economy at a time when the expansion cycle, as we have seen over the past year, is running out. Despite the possible disappearance of the Coronavirus in the future, the restraint in the economies was clearly evident.
Therefore, the International Monetary Fund is calling on governments to act. The job losses, business closures, as well as all the harmful effects of the outbreak on the economy that will end in a tragic outcome, will unfortunately not bring peace after the epidemic. The slowdown in the economy could consolidate the losses caused by the Coronavirus, rendering the harmful effects on the economy permanent.
To give you an idea, the trigger for the closure of, for example, FLybe, Europe’s largest regional travel airline, was the Coronavirus. This has led to the dismissal of more than 2,000 people who are currently unemployed and are awaiting the closure of a tragic episode in the history of airlines in Great Britain. At the moment, these people will find no solace in the containment of the Coronavirus since its effects are unfortunately already irremediable.
However, there are still many companies that are not bankrupt but are in a tough situation. Especially those in the industrial and tourism sectors. In the case of tourism, these companies could suffer losses amounting to 70 billion dollars worldwide. And we are only talking about tourism because if we talk about the air travel sector, the losses could range from 63 billion dollars to 113 billion dollars.
The situation is concerning for the IMF because many companies in the sector could suffer losses. The same applies to companies in the industrial sector. According to the World Trade Organization (WTO), trade losses, in contrast to January, are estimated at 50 billion dollars. This is due to the inability to maintain normal trade flows, which were already burdened by the effects of the trade war.
In short, the International Monetary Fund is calling on individual governments to take action. These measures will be focused on containing the possible harmful effects on the economy, but on the other hand, they must be accompanied by a guarantee to contain losses that, given the economic scenario and as we said earlier, could be irreversible at the end of the storm. The ball is now in the court of the politicians; politicians who do not seem to include the Prime Minister of Spain.