“The poor evolution of the disease in the early stages of the year leads us to be more pessimistic in the short term,” warns the general director of Economics, Ã ?? scar Arce.
The Bank of Spain already warns of the slowdown in the economy in the first month of the year and foresees a downward revision of the projections for economic growth in the first half of 2021. The analysis carried out by the financial supervisor is based on the Increase in restrictions due to the strong impact of the third wave of the coronavirus and is already reflected in indicators such as the registered increase in the number of workers in ERTE in the last days of January.
“The start of the year is being somewhat weaker than what analysts could expect a few months ago. This situation is leading to a rebalancing of the risk analysis to the downside, therefore the poor evolution of the disease in the early stages of the year leads us to be more pessimistic in the short term “, explained the Director-General of Economics and Statistics, Ã?? scar Arce, during his participation in a conference on the role of banks in the management of aid to mitigate the effect of the crisis.
With the first half in the air, the Bank of Spain is already confident that the recovery in growth will take place in the second half of the year. For this, it is essential that two factors coincide effectively: having reached a critical volume of vaccinated people and the implementation of projects financed with European funds.
In this sense, Arce has stressed that this aid should not be aimed solely at improving physical capital, but also human capital. “We have to improve the knowledge and skills of our workers. There is a need to carry out structural reforms in key markets and ensure a sufficiently stable macro and financial environment in the short and medium-term,” he stressed.
The Bank of Spain considers it necessary for the Government to apply a strong fiscal stimulus to mitigate the economic effect of the pandemic, although it also calls for reflection on how we are going to guarantee the sustainability of public finances when the crisis passes. In relation to funds, Arce has asked the Executive to be “rigorous” in selecting projects, prioritizing quality over quantity and haste.
Arce’s words coincide with the publication of the monthly newsletter of the European Central Bank referring to the month of January. The European institution focuses on the recovery of the economy after the shock of last spring, but warns: “However, the latest economic data, information from surveys and high-frequency indicators suggest that activity has decreased in the fourth quarter of 2020, due to the re-outbreak of the pandemic and the consequent intensification of containment measures, which would also be affected in the first quarter of this year “.
This bad start to the year, common in other countries of the continent, will end up conditioning the optimistic growth forecasts that had been turned over to the economy for 2021. “It will take time to achieve herd immunity, and new related adverse events cannot be ruled out with the pandemic, which will pose challenges to public health and the economic outlook, “he concludes.