Bloomberg) — Spain’s central bank cut its forecast for
economic growth this year, saying a weaker-than-expected first
quarter and a slow roll out of the European Union’s recovery
funds will delay the upturn.
A higher price of oil, a slightly stronger euro and a rise
in long-term interest rates also contributed to the Bank of
Spain’s downgrade of its baseline scenario for Spanish gross
domestic product in 2021 to a 6% expansion. The previous
prediction was 6.8%.
The Bank of Spain’s message reflects a mounting sense of
alarm at the European Central Bank that a slow rollout of the
750 billion-euro ($890 billion) recovery fund will hinder a
rebound from the pandemic which has already been stunted by a
chaotic vaccination campaign.
The widening gulf between the EU and U.S. economies has
forced the ECB to accelerate its bond-buying program to prevent
borrowing costs from rising too soon.
Read more: EU’s Plodding Stirs ECB Concerns as U.S.
Delivers Stimulus
The Spanish economy probably contracted in the first
quarter by 0.4% after authorities put in place tighter
restrictions to stem the spread of Covid-19, the central bank
said.
Growth appears to have accelerated somewhat in March,
though, as officials relaxed restrictions and the vaccination
campaign got underway.
Momentum is due to pick up in the second half of the year
as more people are vaccinated and EU leaders agree on the final
details of the recovery fund, which will allow national
governments to begin to invest the funds. Spain and Italy are
set to receive the greatest portion of the funds.
That faster momentum is expected to carry over into 2022,
with the central bank boosting its growth forecast for next year
to 5.3% versus a previous estimate of 4.2%.
The central bank’s baseline scenario assumes that Spaniards
will spend much of what they have saved. Officials don’t expect
tourism, essential to the country’s economy, to normalize until
2022.