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This no-policy change projection occurs in a context of abnormal and historically high risks and uncertainty, mostly of a descending nature. For this reason, the CFP’s projection need to be examined with additional caution.


The CFP thus opted to present two scenarios for 2020-2022: a baseline scenario and a severe scenario. For 2020 the baseline scenario anticipates a Gross Domestic Product contraction of 7.5% while in the severe scenario the reduction is 11.8%.


Macroeconomic projections

The resumption of growth in 2021 (3.0% in the baseline scenario and 4.7% in the severe scenario) and in 2022 (2.6% in the baseline scenario and 3.2% in the severe scenario) is based on the expectation that the shock to the economy is transitory, but the uncertainty about speed of recovery is high.


For 2020  the baseline scenario projects a 5.0% employment contraction and an increase in the unemployment rate to 11% (7.2% and 13.2% respectively in the severe scenario). For 2021 and 2022 employment recovers slightly growing by 2.2% and 1.0%, leading to a fall in the unemployment rate to 9.0% and 8.1%, respectively, according to the baseline scenario.


Fiscal projections

The CFP anticipates a significant General Government budget balance deterioration in 2020, which in the baseline scenario is expected to reach a deficit of 6.5% of GDP and in the severe scenario 9.3%. This budgetary imbalance is reduced from 2021, although not enough to avoid a budget deficit.


The worsening of the budget balance to GDP ratio stems mainly from an increase in the weight of expenditure in GDP and less from  a revenue weight decrease.


CFP projects a sharp increase in the public debt to GDP ratio by 2020, followed by a reduction over the remaining projection horizon, albeit to levels well above those of the pre-pandemic period. For 2020, in the baseline scenario, the debt ratio increases by 15.3 p.p. of GDP reaching an estimate of 133.1% of GDP, while in the severe scenario this increase is of 24 p.p. of GDP bringing the debt ratio to 141.8% of GDP.


The projected debt ratio reduction by 2022 will put that indicator at 129.8% of GDP in the baseline scenario.


This projection contains substantially higher downside risks than those normally associated with this type of exercise. However, there is an upside risk resulting from the European Recovery Plan already proposed by the European Commission (which is not considered here because it has not yet been approved). Internally, a proposal for a budget review bill amending the State Budget Law for 2020 and recalibration of measures to support the economy and employment are still expected.

Date of last update: 03/06/2020

Economic and fiscal outlook . Report nº 7/2020 . 03 June 2020