Moody’S Lowered Spain’S Economic Growth Forecast To 5%, Lower Than That In Brussels.
2021-02-11 | by CusiGO
Moody’s, the rating agency, expects Spain’s economy to grow by 5% by 2021, lower than the European Commission’s estimate and one percentage point below the latest forecast in January. The agency expects the recovery of the eurozone to be achieved in the second half of this year, emphasizing the good performance of industry and construction, while the transport and hotel industries will take longer to take off, which will damage the Spanish economy. “We expect this year to be better, but the recovery will be slow, fragile and gradual and will not reach the level of 2019,” analyst Carlos Winzer concluded at a forum of the agency on Thursday.
According to Moody’s, the “uncertain” progress of the influenza pandemic and the “relatively slow” vaccination rate on the peninsula have led to a downward revision of Spain’s GDP growth estimates, which are expected to grow by 6% by January 2021. The new figures are lower than the European Commission’s forecast of 5.3-5.6 per cent GDP growth this year and 4.8-5.3 per cent next year. Moody’s expects Spain’s economy to grow by 5.1% by 2022, in line with data from Brussels.
“Countries that are highly dependent on tourism, such as Spain, where companies are highly dependent on liquidity, will remain the most vulnerable,” explains Winzer. In 2020, these restrictions have led to the transformation of tourism from a vessel of the Spanish economy to a secondary industry, with its share of GDP falling from 12% to 4%. Gabriel escarrer, chief executive of Melia, told the financial times on Tuesday: “if we lose this summer, we will talk about almost no activity since Thomas Cook broke down in October 2019 and June 2022.”.
Moody’s said it did not expect a “new wave of downgrades” this year after the agency made a big downgrade in the first few months of the pandemic, which accounted for a third of the 1000 European companies it operates. Restrictive measures are more targeted than in March, “Winzer points out. However, it does emphasize that airlines, hotels and automobiles are areas where the recovery will continue.
The U.S. Agency also places the magnifying glass on the Spanish entity. “Our view of the Spanish banking system is negative, mainly reflecting the negative impact of the epidemic on the asset quality and profitability of Spanish banks,” Moody’s report said. He said that as long as there are no strict restrictions and consumption does not collapse, there will be no consideration of lowering the entity rating: “we are still a long way from the serious situation that led us to reconsider the rating of Spanish banks.”
In real estate, Jose de Leon, Moody’s chief executive, predicts that falling house prices will not be enough to offset the decline in income for some groups as a result of the crisis. “Housing accessibility for young people and low-income groups will decline, which will lead to an increase in demand for social housing.” According to de Leon, this situation could lead to an extension of the ban on eviction “outside the epidemic” and a strengthening of rent controls. “This could lead to long-term market imbalances,” analysts explained.