Last year wasn’t a good year for most people. Lockdowns ruined businesses, and led many people to lose their jobs. Simultaneously a surprising large portion of the economy kept running, largely due to government support. However, they weren’t able to protect everything. Tourism got destroyed. Southern European economies, like Spain, rely heavily on tourism. No surprise that Spain’s economy, its GDP, shrank with 12.8% in 2020. The number isn’t final yet, but is an estimate from November 2020, meaning that despite a possible correction, it won’t be far off.
Spain’s Economy crashes – Biggest GDP crash since Civil War
Such a drop in GDP is bigger than the Great Recession of 2008, and akin to the Great Depression in 1929. In Spain, such a drop has not been seen since the start of the Civil War in 1936. In 2009, GDP dropped with a ‘mere’ 3.76%, which was the biggest GDP drop on record for Spain. (Records going back to the 1960’s)
Unemployment going up again
The Great Recession, with a meagre drop in GDP of less than 4%, led to an unemployment rate of as much as 26% in Spain. In 2019, Spain still had an unemployment rate of almost 14%. The unemployment rate had been declining for several years, but 2020 seems to have reversed that trend. An article on Reuters shows us the expected unemployment rate for Spain in 2020 will be close to 16%. Rabobank expects the unemployment figure to rise to 20% in 2021.
Another summer of lockdown, the end of Spain?
Projections hold that GDP will climb by 5-7% in 2021, which still leaves Spain vulnerable. But a better question may be how reliable these predictions are. Vaccin programs are slow, and we may be looking at another summer of restrictions. In such a case, Spain’s economy may not recover until 2022 the soonest.
Overall, Spain is performing poorly in every possible measure. They have a high debt, a high unemployment, and a weak GDP. Since they are linked to the Euro, it’ll be up to the other euro-countries to show their solidarity. In the coming year, Spain may become a catalyst in a new euro-crisis.
The European Union moves from crisis to crisis
The EU seems to move from crisis to crisis. In 2008 the credit crisis. In 2011 the euro crisis. In 2015 the migrant crisis. And now in 2020 the corona crisis. Each forms a slap in the face of the EU, which consistently loses strength, and at the start of this year, even one of its members. And 2021 will see Spain’s crashing economy, followed by what, a debt crisis? A currency crisis? A new migration crisis?