The Government estimates that the economy will return to pre-pandemic levels before the end of the year and keeps its growth forecast at 6.5%.

Moncloa Palace, Madrid

The First Vice-President of the Government and Minister for the Economy and Digital Transformation, Nadia Calviño, has briefed the Council of Ministers on the economic situation and presented the update of the macroeconomic framework that will accompany the upcoming presentation of the draft General State Budget for 2022.

Calviño stressed that indicators suggest that the Spanish economy will recover to pre-pandemic daily activity and employment levels before the end of the year. This recovery, she explained, rests on five pillars: the success of the vaccination against COVID-19, the recovery of international tourism, the dynamism of consumption, a notable increase in investment and the accelerated roll out of the Recovery, Transformation and Resilience Plan.

Nadia Calviño has detailed that Spain significantly outperforms the main countries in terms of vaccination rate, which has allowed an increase in economic activity and mobility. The recovery has been strongest in the accommodation and catering sectors, two of the hardest hit by the pandemic, which are already above 2019 spending levels. The Executive estimates that citizens have saved 50 billion euros during the pandemic, which allows for a positive evolution of consumption in the coming months. Moreover, the Gross Domestic Product (GDP) for tourism is close to 50% of that of 2019, which was a record year, thanks to the reactivation of foreign tourism during the summer months.

The first vice-president assured that the key differential factor in this recovery is the dynamism of investment, which in 2022 will reach levels higher than those before the pandemic. Construction - she added - is still below expected growth, but everything points to a strong recovery of investment in capital goods, a development directly related to the business support measures adopted since March 2020, the extraordinary benefit for the self-employed and direct aid to solvency.

A rapid, robust, fairer and more equitable recovery

Foto: Pool Moncloa/César P SendraDaily economic activity is expected to reach pre-pandemic levels by the end of the year. In the case of employment, the recovery will be earlier.

Nadia Calviño specified that the first quarter of 2022 will be the first with a higher level of economic activity than that recorded in the same period of 2019, and pointed out that "there is no precedent in Spain's recent economic history for such a rapid recovery in activity and employment", which she attributed to the different economic policy responses, on a national, European and global scale.

"Monetary and fiscal policy support has been key to this rapid exit, to avoid permanent damage, particularly in terms of job destruction, which would have led to a slower recovery and further damage to the productive and social fabric," she remarked.

The vice-president detailed that the growth forecast for 2021 and 2022 is maintained - 6.5% and 7%, respectively - thanks to the drivers of consumption and investment in capital goods, which will increase by 16.5% this year and 18.3% next year. The foreign sector will continue to make a small positive contribution to GDP growth.

Regarding the upwards revision of the Organisation for Economic Co-operation and Development (OECD) forecasts for Spain to 6.8% in 2021, the highest rate in Europe, Calviño stated that it is important to remain prudent, given the uncertainty about the evolution of the pandemic at a global level and other geopolitical factors.

With regard to prices, the July forecasts, which already included an upward revision of energy products, are also maintained. At this point, the vice-president referred to the inflation forecasts published today by the Bank of Spain, which point to an average harmonised GDP increase of 2.1% in 2021. In this respect, she pointed out that while the rate of change of prices has been above 3% in the summer months, it was 0% in the first months of the year.

The Executive estimates that the range of measures adopted to contain the impact of international energy prices on electricity bills will reduce inflation by four tenths of a percentage point in 2021. However, Calviño pointed out that "we must remain very attentive to any bottlenecks in global value chains and price rises of some key raw materials".

On the other hand, the first vice-president referred to the indicators of the four axes of the Recovery Plan: green, digital, gender equality and social cohesion, which reflect "significant progress". She also stressed that it is important for the Government to achieve "a fair recovery that reaches all citizens and all territories and that allows us to build a better country for younger generations".

After a year and a half of difficulties," concluded the vice-president, "the uncertainties on the horizon for the Spanish economy are being cleared up, allowing us to approach the roll out of the Recovery Plan with confidence.

Emergency situation on La Palma after the volcano's eruption

Foto: Pool Moncloa/César P SendraThe Council of Ministers examined the report on the situation on the Canary island of La Palma following the eruption of a volcano on Sunday 19 September.

The Minister for Territorial Policy and Government Spokesperson, Isabel Rodríguez, after stressing that there have been no human losses, explained that according to the latest Civil Protection data, 6,000 people have been evacuated and 183 homes and 200 infrastructures have been affected. Air traffic on the island is open and operating normally.

Rodríguez praised the responsibility and exemplary behaviour of the island's residents and asked that it be maintained because there is, for the moment, no estimate of how long this emergency may last. The main recommendations are to heed evacuation requests when they occur and to stay at least two kilometres away from the areas where gases are emitted.

Collaboration and coordination

Isabel Rodríguez has expressed the Government's commitment to the people of La Palma, represented by the president, Pedro Sánchez, who has been on the island since Sunday, and has assured that all necessary measures will be activated.

For the time being, the State troops, made up of the Civil Guard, the National Police, the Military Emergency Unit and personnel from the General Administration, total 540 people working on the ground.

In addition, two concrete measures have already been put in place for those affected. On one hand, arrangements are being made with various banks to make empty properties available for evacuees to use. On the other, a free telephone number and a website (900 222 665 and www.consorseguros.es) have been set up so that affected people who have insured their homes or businesses can now contact the Insurance Compensation Consortium to submit their applications.

The minister highlighted the collaboration and coordination between the state, regional, island and local administrations, with a further 650 troops, and thanked social organisations such as the Red Cross, which has provided 625 beds in the El Fuerte barracks for people who has to leave their homes .

The spokesperson also praised the work of the scientists, which made it possible to predict the eruption and have the necessary information to make the most appropriate decisions at any given moment: "Despite the images we have all seen and the drama that many families are going through, the prevention, coordination and emergency mechanisms have worked".

Other agreements

The Executive has also declared Andalusia, Aragon, the Canary Islands, Castilla-La Mancha, Castilla y Leon, Catalonia, Valencia, Extremadura, Galicia and the Balearic Islands as areas seriously affected by Civil Protection emergencies due to damage by fires or rain after 24 August.

In addition, the Government has agreed on an institutional declaration on International Day against Sexual Exploitation and Trafficking of Women and Children, which is held on 23 September.

Non official translation