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ECONOMY

Just how bad will Spain’s recession be in wake of coronavirus crisis?

Spain's leftist government on Tuesday forecast a deeper-than-feared contraction of the economy in 2020 as the country grapples with a second wave of Covid-19 infections.

Just how bad will Spain's recession be in wake of coronavirus crisis?
Photo: AFP

Economy Minister Nadia Calvino said the government now sees the economy, the euro zone's fourth largest, falling 11.2 percent in 2020, compared with a previous forecast in April for a 9.2 percent slump.

But she said the economy was expected to rebound in 2021 with growth of at least 7.2 percent, mainly on the back of higher private consumption.    

Spanish authorities imposed one of Europe's strictest lockdowns to curb the pandemic from mid-March to late June, triggering one of the deepest recessions in the region.

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The economy tumbled by 17.8 percent in the second quarter after falling by 5.2 percent in the first quarter, but Calvino said the recovery was “on going” in the third quarter.

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

 

The unemployment rate will rise in the tourism-dependent country to 17.1 percent this year, from 14.1 percent last year, and will only drop to 16.9 percent in 2021 according to the government's latest forecast.

Although the national lockdown was lifted in late June, Spain is currently fighting a second wave of the virus which has now killed over 32,000 people and infected more than 800,000, the highest infection rate within the European Union.   

Spain's economy is particularly vulnerable to the pandemic because of its reliance on tourism and its greater concentration of small companies, many of which do not have the financial strength to cope with even a short-term disruption.   

However, it will benefit considerably from the historic 750-billion-euro rescue plan agreed by the European Union's 27 member states in July under which it will receive 140 billion euros.

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ECONOMY

Spain’s middle-class youngsters the most likely to end up poor across all EU

Spain leads the ranking of EU countries with the highest risk of young people ending up in poverty as adults, despite coming from families without economic difficulties.

Spain is the fourth EU country with the highest inherited poverty
Spain is EU country with most middle-class young people who end up poor. Photo: Jaime ALEKOS / AFP

Spain is also the fourth EU country with the highest rate of inherited poverty risk, according to Eurostat, the EU Statistical Office.

Data on intergenerational poverty indicates that there is a correlation between the financial situation of the household you grew up in and the risk of being poor when you reach adulthood and in Spain, there is a strong link. 

The latest statistics available from 2019 show that the at-risk-of-poverty rate for the EU was 23 percent among adults aged 25 to 59 who grew up in a poor financial situation at home when they were 14 years old. This is 9.6 percentage points more than those who come from families without financial problems (13.4 percent). 

READ ALSO: Spain’s inflation soars to 29-year high

How the situation in Spain compares with the EU

Spain has become the EU country with the highest risk of poverty among adults who grew up in families with a good financial situation  – 16.6 percent.

This was followed by Latvia with 16 percent and Italy with 15.9 percent.

That statistics also show the countries where it is less likely to be poor after growing up in households without economic difficulties. These include the Czech Republic (5.9 percent), Slovakia (7.9 percent) and Finland (8.5 percent).

The overall poverty rate in the EU decreased by 0.1 percentage points between 2011 (13.5 percent) and 2019 (13.4 percent), but the largest increases were seen in Denmark (1.9 points more), Portugal (1.8 points), the Netherlands (1.7 points) and Spain (1.2 points).  

On the other hand, the biggest decreases in the poverty rate were seen in Croatia (-4 percent), Lithuania (-3.6 percent), Slovakia (-3.5 percent) and Ireland (-3.2 percent).

READ ALSO: Spain’s government feels heat as economic recovery lags

Inherited poverty

The stats revealed that Spain was also the fourth country with the highest rate of inherited poverty risk (30 percent), only behind Bulgaria (40.1 percent), Romania (32.7 percent) and Italy (30.7 percent).

This means that children of poor parents in Spain are also likely to be poor in adulthood. 

The countries with the lowest rate of inherited poverty risk were the Czech Republic (10.2 percent), Denmark (10.3 percent) and Finland (10.5 percent).

The average risk-of-poverty rate for the EU increased by 2.5 percentage points between 2011 (20.5 percent) and 2019 (23 percent), with the largest increases seen in Bulgaria (6 points more), Slovakia and Romania (4.3 points), Italy (4.2 points) and Spain (4.1 points).

The biggest drops were seen in Latvia (-8.5 points), Estonia (-8.0 points) and Croatia (-2.3 points). 

The largest gaps in people at risk of poverty when they reach adulthood were in Bulgaria (27.6 percentage points more among those who belong to families with a poor economic situation as teenagers compared to those who grew up in wealthy households), Romania (17.1), Italy (14.8), Greece (13.5) and Spain (13.4).

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