Madrid Desk, June 8 (efe-epa).- Two of the European Union’s most fragile economies, Spain and Italy, revised their growth forecasts on Monday and were braced for contractions this year as GDP reels from tough restrictions in place throughout much of the second quarter of the year.
German authorities noted a historic decline in industrial output while France’s figures are due to be set out in the budget later in the week amid forecasts of an 11 percent contraction in the economy.
Spain’s central bank on Monday said the country’s economy could contract between 9 and 11.6 percent this year as a result of the severe restrictions rolled out across the country to curb the spread of Covid-19.
Offering a gloomier but less-likely hypothesis, the Bank of Spain added that GDP could contract by as much as 15.1 percent if the recovery process was complicated by factors such as a secondary wave of infections strong enough to warrant fresh confinement measures.
In the event Spain’s economy is able to quickly get back on its feet after months of national lockdown, the damage this year would be limited to a 9 percent contraction. A more gradual recovery would see it contract by 11.6 percent, the bank said.
The country’s second quarter results are forecast to show a contraction of between 16 and 21.8 percent, far harsher than the 5.2 percent registered in the first three months of 2020, a time period that was only affected by roughly two weeks of lockdown in late March.
The economy was not expected to return to pre-coronavirus levels until 2020, according to the forecast.
Italy’s already delicate economy is set to contract 8.3 percent this year as a result of the nationwide coronavirus restrictions before a slight bounce back of 4.6 percent in 2021, the national statistics institute (Istat) said Monday.
Istat said the economy had already began to stagnate at the end of 2019 with few signs of recovery coming from industrial production or trade in the beginning of 2020, just before the health crisis gripped.
“Starting from the end of February the Covid-19 containment measures introduced by the government had a deep impact on the economy, influencing production, investment and consumption decisions and very negatively affecting the labour market,” Istat said in a statement.
“The rapid spreading of the pandemic in most of the countries has also disrupted international trade and consequently determined a dramatic fall in Italian firms exports.”
Reduced domestic demand will be the main driver of the drop in GDP, accounting for a 7.2 percent contraction. Household spending is set to drop 8.7 percent and investment 12.5 percent.
Restrictions in Italy are now being gradually lifted and on 3 June the country reopened its borders to its neighboring European Union member states.