Spain to Lower 2021 Economic Forecast After Weak Start to Year

Spain’s government is set to trim its 2021 growth forecast after renewed pandemic restrictions led to a worse-than-expected first quarter and pushed back the country’s recovery.

An increase in Covid-19 cases forced some Spanish regions to impose restrictions on movement at the beginning of the year, dealing a blow to companies’ hiring plans and dragging on growth in the first quarter, Economy Minister Nadia Calvino said in a Bloomberg TV interview on Thursday.

“That is the main reason why we are going to revise downward our forecasts for this year,” Calvino said. “We were expecting to have around 7% growth this year and it may be smaller due to the delay -- the one quarter delay in terms of the recovery.”

Spain to Lower 2021 Economic Forecast After Weak Start to Year

A downward revision would put the government’s forecasts more in line with those of other economists. The Bank of Spain, for instance, said last month it expects the economy to expand 6% in 2021 in its baseline scenario. Prime Minister Pedro Sanchez’s administration published its economic outlook in October.

Spain to Lower 2021 Economic Forecast After Weak Start to Year

Despite the setback, Calvino said that economic indicators started to improve in March, in line with the government’s expectations for a strong second half of the year. The country’s immunization program is also set to underpin the recovery.

“All indicators are going toward the positive,” she said, adding that Spain is on track to have around 70% of its population vaccinated by the summer.

Calvino also welcomed a proposal by the U.S. on digital taxation and global minimum levies, while cautioning that leaders would have to hash out the details.

“That gives us hope that by the summer we will be able to reach a global agreement on the tax issues, which we have been working on for years,” she said. “We have to stop the race to the bottom.”

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