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Only Japan, Sudan and Zambia will borrow more than Spain this year


The coronavirus has not only cost Spain the lives of 33,204 people, according to the contador maintained by Johns Hopkins University since the pandemic broke out. It has also ruined the country.

Here are some of the figures, according to the International Monetary Fund (IMF) statistics published yesterday and today. The crisis will make the Spanish economy produce in 2020 152,979 million euros less than in 2019. It is as if the Basque Country, Galicia and Murcia had ceased to exist. Moreover, we will not recover the level of production -the Gross Domestic Product, or GDP- that we had on December 31st until 2023: if it is not a requested decade, as they say in Latin America to refer to the 80s, it is, at least, a lost five years.

If that number sounds very abstract, here is another that may be more clarifying: if the national economy is divided among the entire population -from newborns to the elderly- the piece from cake that corresponds to each Spanish will fall this year by 5,361 euros. The average citizen will not return to the wealth level of 2019 until 2024. Progress is slower than that of GDP because the population, although little, is growing.

Employment is another tragedy. In 2020 there will be 964,000 fewer people working than in 2019. The unemployment rate will not return to the levels it had before Covid-19 until 2026 … at the earliest, because the IMF’s statistical projections end in 2025, and in that year there will still be more unemployment than there was in 2019.

To alleviate this catastrophe, aggravated by the collapse in tax collection because the economy is in a comatose state, the Public Administrations are going to have to get into debt this year in 153,780 million euros. That means, again, 3,308 euros per person from 0 to 100 years old. This year’s deficit will be greater than those of 2015, 2016, 2017, 2018, and 2019 combined.

These figures are provisional and are conditioned by an enormous degree of uncertainty. But no one doubts the incredible blow that Covid-19 has meant for Spain. An example: as the IMF report points out Monitor Fiscal, published today, increasing the number of patients that can be treated in the Intensive Care Units (ICU) in Spain by 20% would cost between 35,770 and 59,618 million euros. That’s double the entire Defense Budget.

This is how the dà © vated in Spain, which was among the lowest of the large industrialized economies, this year is now very close to the average for that group. With an imbalance equivalent to 14.1% of GDP, Spain is only behind Japan (14.2%), Great Britain (16.5%), Canada (19.9%), and the United States (18.7%). The latter country is, however, a case apart: the US has the dollar as its currency, which in practice is the world currency, which gives it, at least in theory, a virtually unlimited borrowing capacity.

But the deficit is only the most benign part of the IMF forecasts, which, on top, were closed before the second wave of Covid-19 and the closure of Madrid, and which are based on the assumption that in 2021 the pandemic will be controlled, and the activity restriction measures completely lifted. The Fund, in addition, has included in its analysis the arrival of aid committed by the European Union between 2021 and 2024.

Generalized debt

Because the truly spectacular part is the debt. If in December 2019 every Spaniard (once again, from newborn children to retirees) debía on average 25,575 euros, now it would be 28,878. Is an increase of 3,303 euros, which adds to the fall in national income per capita of 5,361 euros.

If you leave that comparison aside and look at the absolute figures, the picture is just as terrifying. He Monitor Fiscal estimates that the Public Administrations debt of Spain this year will grow the equivalent of 27.5%, and will go from 95.5% to 123% of GDP. In the developed world, only Japan has a worse result, with an increase of 28.2%, accumulating a debt of 288.2% of GDP. But there is a considerable difference between the third world economy and the Spanish one: Japan has a huge savings rate that allows it to smoothly finance its chronic imbalances without the need to resort to foreign capital. Among the developing countries, there are two that win a Spain: Sudan and Zambia. The first is almost a failed state, which is recovering from a series of civil wars and from the revolution and coup that overthrew dictator Omar al-Bashir in 2019; Zambia has suffered an economic collapse due to the closure of the Chinese economy, to which it destined most of its copper and cobalt exports.

Help and recommendations

Not Spain. For this reason, the aid received from the European Union is of paramount importance. But not enough. Even with its forecasts for the end of Covid-19, the IMF does not foresee a firm reactivation of the Spanish economy. That means less tax revenue and more government spending. Thus, debt in relation to GDP will continue to grow in 2021, and will only show a gradual reduction from that year on. All in all, a debt of 120% of GDP is 20% higher than the world debt, estimated by the Fund at 100%. And it is the consequence of a very timid fiscal consolidation after the end of the euro crisis in 2013. A fiscal consolidation that, in fact, was abandoned in 2019. This is how a debt accumulated that, when the coronavirus hit Spain a, had already cut the Administration’s room for maneuver.

For the moment, the Fund advises “to avoid a premature withdrawal of fiscal support.” That is: public support policies should be followed, especially in health and education. The opposite would be to aggravate the crisis even more. But at some point, when the recovery begins, the Government of Spain, like most of the EU – and the US if it did not have the dollar – will have to carry out a tough fiscal adjustment. An adjustment that the Spanish will make by being poorer and more indebted.

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