There has been a lot of talk in recent weeks about what the recovery that the Spanish economy. One of the organizations in which the most authoritative voices for forecasting are found is the Bank of Spain (BdE). The supervisor has a study service that, in addition to offering forecasts that expose the situation in which the country will find itself when the pandemic dissipates, has carried out studies as interesting as they are useful for the application of measures that try to relax the impact, thus as the effects derived from a crisis which, given nature, shows no precedent.
His latest report includes a complete analysis in which he studies how effective the economy would be for lifting of social distancing measures and reopening of trade, in relation to the recovery of lost employment during the crisis. In addition it is considered if the reopening that they try to promote from the Government –looking for recovery in “V”– it will be as beneficial to the economy as has been said. What some consider a successful policy, in light of the data, may not be as successful as expected.
The last few weeks have given many economists, in light of what has happened, to make various diagnoses with one objective: to try to shed light on reflections and recommendations that, in order to recover the economy, would be heard by the political class. One of the most polar initiatives has been to propose the rapid reopening of activity so that the crisis – taking into account what the productive fabric is like – did not lead to a massive destruction of employment.
The dichotomy It can be summarized as follows: Should social distancing measures be continued or should the economy be reopened despite the possibility of further relapses? Initially, the Government opted for an intensification of the distancing social in comparison in the rest of the developed countries and in recent weeks it has accelerated the reopening. In fact, this Sunday the alarm state ends.
In Spain, the business network, in addition to being made up of mostly SMEs, has very limited resources. With an average box of 57 days, as well as a liquidity that represents 3% of the business liquidity of all the countries of the European Union, an excessive prolongation of social distancing measures could have made the situation even more unsustainable for a large percentage of small Spanish entrepreneurs.
However, despite the fact that the reopening measure seemed the best possible way for economic recovery, as we have warned for weeks, it is useless if it is not accompanied by a revival of consumption. Precisely in this way the Bank of Spain concludes the study carried out. The body shows that a premature reopeningWhere the economic revival is not accompanied by a revival in consumption, it could further jeopardize entrepreneurs. The decrease in consumption is already at 35%, therefore, if we compute limited resources to a situation in which the reactivation of supply is not compensated by a reactivation of demand, fixed costs increase and these resources are even scarcer than in the scenario that, a priori, they were.
Since Civic Foundation We have warned both actively and passively about this scenario, but until the data has reflected the harsh reality, no action has been taken on the matter. Well, there is no point in reopening the business if the public does not subsequently show the necessary desire to re-consume; especially in a scenario in which the costs of reopening, if not accompanied by that level of compensatory consumption, further reduce the low liquidity with which, from the start, the Spanish businessmen already had.
With a forecast of strong job destruction which will raise the unemployment rate above 22%, according to the forecasts of the Bank of Spain, the country cannot make decisions randomly, putting at risk the situation of a productive fabric that, in the face of the coronavirus crisis, is seriously deteriorated.
Francisco Coll Morales is an economist and coordinator of the studies service of Fundación Civismo.