Home News Spain to unveil rescue plan for virus-hit economy

Spain to unveil rescue plan for virus-hit economy

Published on October 07, 2020

Facing resurgent virus infections, Spain’s government will on Wednesday unveil a recovery plan aimed at yanking the country out of its worst economic slump in decades.

The pandemic has pulverised Spain’s tourism-dependent economy, with the government warning Tuesday that GDP would fall by 11.2 percent this year, down from a previous prediction in May for a 9.2 percent decline.

It sees the jobless rate jumping to 17.1 percent this year while the public deficit should hit 11.3 percent of economic output.

Against this grim backdrop, Prime Minister Pedro Sanchez will unveil the details of his leftist government’s “Recovery and Resilience Plan” at 11 am (0900 GMT).

The measures will be financed by 140 billion euros ($165 billion) in grants and loans which Spain will receive from the historic 750-billion-euro rescue plan agreed by the European Union in July.

“The virus exists and our obligation is to fight it with all our might, and then… to channel these forces into a historic accelerator to transform our country. We can’t lose this huge opportunity,” Sanchez said last month.

Sanchez’s minority government has linked passage of the measures to approval of its 2021 budget as a way to pressure smaller parties to support it.

The economic recovery plan will encourage investment in the economy’s digital transformation, the transition to greener energy sources and greater gender equality at work, in line with EU objectives.

– Recession –

The government predicts the Spanish economy, the eurozone’s fourth largest, will expand by 7.2 percent in 2021, mainly due to a rebound in private consumption.





And Economy Minister Nadia Calvino said Tuesday that the recovery plan could prompt growth next year to be “two to three percentage points higher” than this “baseline scenario”.

Spain plunged into recession in the second quarter when its economy tumbled by 17.8 percent due to the pandemic, after falling by 5.2 percent in the first quarter.

A recession is commonly defined as two consecutive quarters of a contraction in GDP.

Historians say only Spain’s 1936-39 civil war hit the economy harder.

The government has been spending four billion euros a month on a furlough scheme in a bid to avoid massive layoffs, especially in sectors hit hard by the pandemic like tourism.

The attempt to revive the economy comes as Spain is struggling with a second wave of infections which led officials to put Madrid and nine nearby towns in partial lockdown on Friday night.

Hit by one of Europe’s worst outbreaks, Spain imposed a strick nationwide lockdown from March to the end of June which brought the economy to a virtual halt.

The virus has now killed over 32,000 people and infected more than 800,000 nationwide.