NAME:

Muhammad Umer Jamil

REGUSTRATION NO:
531-FSS/BSIR/S18

TOPIC OF ASSIGNMENT:
The Impact of Covid-19 on the Economy of Spain

OUTLINE:
1- The Outbreak of Covid-19 in the world

2- The outbreak of Covid-19 in Spain

3- Impact of Covid-19 on the Economy of Spain

4- Six Charts on Spain’s Economy and Response to COVID-19

5- Conclusion

The Outbreak of Covid-19 in the world:

The outbreak of corona virus initiated as pneumonia of unknown cause in December 2019 in
Wuhan, China, which has been now spreading rapidly out of Wuhan to other countries. On
January 30, 2020, the World Health Organization (WHO) declared coronavirus outbreak as the
sixth public health emergency of international concern (PHEIC), and on March 11, 2020, the
WHO announced coronavirus as pandemic. It is the sixth nation worldwide to report one million
cases after the US, India, Brazil, Russia and Argentina

The outbreak of Covid-19 in Spain:

The virus was first confirmed to have spread to Spain on 31 January 2020, when a German
tourist tested positive for Covid-19 in La Gomera, Canary Islands. But the first case of Covid-19
was reported in Mid-February in Spain. By 13 March, Cases had been confirmed in all 50
provinces of the Country. A lockdown was imposed on 14 March 2020. On 29 March, it was
announced that, beginning the following day, all non-essential workers were ordered to remain at
home for the next 14 days. By late March, the Community of Madrid has recorded the most
cases and deaths in the country. On 25 March, the official death toll in Spain surpassed that of
mainland China. On 2 April, 950 people died of the virus in a 24-hour period—at the time, the
most by any country in a single day. On 17 May, the daily death toll fell below 100 for the first
time, and the 1 June was the first day without deaths by coronavirus. The state of alarm ended on
21 June. However, the number of cases increased again in July in a number of cities including
Zaragoza, Barcelona and Madridand, which led to no national lockdown but reimposition of
some restrictions.

By November 18, 2020, the number of confirmed cases in the country is 1,510,023 and
Hospitalized Cases is 179,226 (total) 4,357 (in last 7 days). The number of Recovered cases is
150,376. In total 41,688 Covid-related deaths have been recorded.

Impact of Covid-19 on the Economy of Spain:

The pandemic has taken a significant toll on Spain’s people and economy, following five years
of strong growth and job creation. A second wave of infections that started in mid-July has put a
lid on the recovery. According to the IMF’s latest economic health check of the country, it will
take several years for the Spanish economy to recover. And the outlook is subject to strong risks.
Impact of COVID-19 on economy leaves more than 1 million people without a job in second
quarter. The impact of COVID-19 and the restrictive measures adopted to contain the pandemic
meant that the number of people in work in the second quarter of the year fell by 1,074,000,
down 5.46%, to stand at 18,607,200.

The Spanish economy is more dependent on tourism than other European economies (tourism
makes up 14.3 percent of GDP in Spain, versus 9.5 percent in the European Union), which may
be greatly affected by the restrictions generated by COVID-19. Spain is less dependent on heavy
industry or on professional and scientific activities (12 and 9 percent respectively, compared with
16 and 12 percent in the European Union).

Over the last 12 months, as a result of COVID-19, the number of jobs shed, in year-on-year
terms, amounts to 6.05%. It should be taken into account that this decline has only taken place
during the pandemic. In the second quarter, the number of people who lost their jobs rose by
55,000, to stand at 3,368,000, with an unemployment rate of 15.33%.

As a result of the coronavirus crisis, output is expected to decline by 12.8% of GDP, an

unprecedented figure that is worse than in any other advanced country. The International
Monetary Fund (IMF) predicted that the Spanish economy will shrink by 12.8% this year. The
unemployment rate in Spain in 2020 and 2021 is expected to hover around 16.8%.

The Spanish economy suffers major contraction due to COVID-19:

Covid-19 has drastically ended almost seven years of growth. Domestic demand subtracted 5
percentage points of quarterly GDP growth and external demand 0.2 percentage points – imports
and exports both contracted by 8.4 percent q-o-q. Tourism services export even contracted by 19
percent q-o-q. Meanwhile, the sectoral breakdown shows that activity in all sectors contracted,
with construction (-8.1 percent) and services (-5.6 percent) faring the worst.

COVID-19 has abruptly ended almost seven year of continuous growth in Spain. The outlook for
second quarter is much worse due to lockdown measures and weak demand. The GDP contracted
by 5.2 percent q-o-q and 4.1 percent year-on-year in Q1. The economy can slowly start to
recover From Q3, but the path of recovery is clouded by a vulnerable sectoral composition and
substantial demand fallout. The Firms and households are better able to absorb shocks to income
than back in 2008, 2009, but the current shock is larger and much more unevenly distributed.
The Government finances are set to worsen significantly, which could endanger public debt
sustainability and will hamper longer-term growth. The impact of COVID-19 on revenues in
Spain will vary by sector, with slower recovery times likely for sectors suffering stronger shocks.

Unemployment:
Impact of COVID-19 on economy leaves more than 1 million people without a job in second
quarter in Spain. The number of people out of work rose by 55,000 in this period, to stand at
3,368,000, and the unemployment rate stands at 15.33%. While the number of people on
permanent employment contracts fell by 361,400 (down 2.91%), the number on temporary
employment contracts fell by 671,900 (down 16.22%). This pattern is similar in year-on-year
terms, with a drop of 929,100 temporary workers and of 232,200 permanent workers. In the
second quarter, the number of people who lost their jobs rose by 55,000, to stand at 3,368,000,
with an unemployment rate of 15.33%. By sector, the Services sector saw the largest rise in
unemployment in the last quarter, up 199,000, and in the last 12 months, by 385,900.

By autonomous region, in quarter-on-quarter terms, the largest increases in unemployment took

place in Catalonia, with 61,300 more people unemployed, the Region of Madrid, up 54,500 and
the Region of Valencia, up 42,500. In contrast, falls in unemployment were recorded in
Andalusia, with 48,200 fewer unemployed, Castile La Mancha, down 20,900 and Extremadura,
down 15,000.

The unemployment rate in Spain in 2020 and 2021 is expected to hover around 16.8%. In year-
on-year terms, the largest rises in unemployment were also posted in Madrid, with 62,900 more
people out of work, the Region of Valencia, 43,100 and Catalonia, up 41,700. Falls in
unemployment were posted in Andalusia, down 47,000, the Canary Islands, down 13,300 and
Castile La Mancha, down 5,000.

Spain has been in the midst of a balanced economic recovery in recent years, with an average
GDP growth of 2.8% between 2014 and 2018. For 2019, the IMF estimates a growth of 2% amid
net exports and a slower private consumption. Despite a rise in real wages, however, private
consumption has been growing at its slowest pace since 2014, as households are increasing their
level of precautionary savings. According to the updated IMF forecasts from 14th April 2020,
due to the outbreak of the COVID-19, GDP growth is expected to fall to -8% in 2020 and pick
up to 4.3% in 2021, subject to the post-pandemic global economic recovery. Domestic demand
should remain the main growth driver.

Spain’s economy will shrink more than most in 2020, says IMF. The International Monetary
Fund (IMF) predicted that the Spanish economy will shrink by 12.8% this year, the biggest
contraction of all advanced economies. There is no precedent for such figures in modern Spanish
history. A decline of 12.8% makes any other crisis seem small by comparison.

Six Charts on Spain’s Economy and Response to COVID-19:

The pandemic has taken a significant toll on Spain’s people and economy, following five years
of strong growth and job creation. A second wave of infections that started in mid-July has put a
lid on the recovery.

According to the IMF’s latest economic health check of the country, it will take several years for
the Spanish economy to recover. And the outlook is subject to strong risks.

Here are six charts on Spain’s economic outlook and the country’s response to the crisis.

1. Economic Disruption:

Despite a sharp rebound in the third quarter, the Spanish economy remains 8.7 percent below its
level a year ago—one of the largest contractions in Europe. The magnitude of the drop reflects
the large-scale spreading of infections, which required strict lockdown measures. Structural
features that make the Spanish economy vulnerable to disruptions also played a role. Contact-
intensive service sectors like tourism, which accounts for about 12 percent of Spain’s economy,
were hit especially hard. Small and medium-sized companies, which typically have fewer
financial resources and contribute to over 70 percent of employment, are struggling to stay
afloat. The widespread use of temporary employment accounted for most of the job losses.
2. COVID-19 Economic Support:

The Spanish authorities have provided swift income and liquidity support to limit the fallout of
the pandemic. The short-time work scheme benefited about 22 percent of salaried workers at its
peak. And public loan guarantees have targeted small businesses. In the near term, flexible and
agile fiscal support needs to remain in place. Over time, the measures should become
increasingly targeted, with a focus on vulnerable groups and viable firms.
3. Highly vulnerable:

Addressing corporate sector vulnerabilities is crucial for Spain’s recovery from the COVID-19
crisis. Taking into account the impact of policy measures, the share of debt at risk of vulnerable
firms is estimated to rise by 7 percentage points—to about 37 percent—as opposed to rising by
27 percentage points without policy measures. This highlights the critical importance of policy
support. Shortcomings in the insolvency frameworks, if not addressed, will weaken the
economy’s capacity to deal with a potential wave of insolvencies. A slow restructuring of the
economy could dampen firms’ profitability and investment, lowering the country’s potential
growth.
4. Energy Inefficient:

The EU Recovery and Resilience Facility is an exceptional opportunity for Spain. It can provide
a demand boost to support the recovery, while closing gaps in green infrastructure and human
capital. This will accelerate the transition to a low-carbon economy and strengthen the
economy’s long-term potential. Residential housing is an example of a sector that would benefit
from labor-intensive, climate-compatible public investment. It accounts for about 16 percent of
Spain’s non-EU Emissions Trading System emissions, is difficult to decarbonize, and is one of
the most energy inefficient in Europe.
5. Young and Unemployed:

The pandemic is widening inequalities in the labor market. The job market disruptions among on
young, low-skilled, and temporary workers have been especially harsh. Going forward, policies
to overcome the overuse of temporary contracts and enhance the employability of dislocated
workers through better active labor market policies, such as more targeted vocational training,
will be key for greater social inclusion.
6. COVID-19 and Gender Inequality in Spain:

The pandemic is having an especially detrimental effect on women, putting decades of progress
in gender equality at risk. Women are particularly vulnerable to the economic fallout of the
pandemic. About 29 percent of women in Spain worked in jobs that were hit hardest by social
distancing and lockdowns, compared with 21 percent of men. At the beginning of the lockdown,
Spanish women worked at least two hours more of unpaid housework every day than men.
Boosting family and childcare support and promoting flexible working arrangements are the key
priorities for achieving greater gender equality.
Conclusion:

Spain’s economy faces long-lasting pandemic drag warns central bank. The output will be up to
6 per cent below pre-virus level by end of 2022, says Bank of Spain. As for 2021, the IMF
expects Spain to grow at a faster rate than the euro zone as a whole – 7.2% compared with 5.2%
– while the Spanish government is hoping that the effects of the European recovery fund will
push growth to 9.8%. As for 2021, the IMF expects Spain to grow at a faster rate than the euro
zone as a whole – 7.2% compared with 5.2% – while the Spanish government is hoping that the
effects of the European recovery fund will push growth to 9.8%.