Spain’s central bank forecasts coronavirus crisis will hit the country’s economy even harder than predicted earlier

SPAIN’S central bank has forecast the coronavirus crisis will have an even greater hit on the country’s economy than predicted earlier.

Banco de España governor Pablo Hernandez de Cos expects the crisis to last longer than earlier estimations and in the best possible scenario for GDP to fall 9.5 per cent, three points more than forecast a month ago.

Hernandez de Cos told Congress’s Economy Commission on Monday that recovery is not going to be plain sailing. He pointed out that as it was GDP dropped by 5.2 per cent in the first quarter of the 2020, and that by the end of the year the economic downturn would be the worst in times of peace.

He also said not only could the crisis last longer than earlier anticipated, it could cause “lasting damage” to Spain’s economic structure.

According to the bank, GDP could fall by as much as 12.4 per cent, or even more, followed by increases of between 6.1 and 8.8 per cent next year, meaning the recovery “will be insufficient to return to the scenario before the crisis.”

The governor pointed out the predictions included the application of government fiscal and monetary measures, saying without these the situation would be even worse.

He advised against the removal of emergency assistance measures in the short-term, saying this would “increase the risk of economic growth suffering longer lasting damage.”