EsadeEcPol assesses the economic impact of the crisis and proposes public policies to guide the transition phase
‘Spain does not have sufficient operating capacity to implement a comprehensive measurement, tracking and self-isolation strategy on a par with those of other countries more accustomed to dealing with respiratory epidemics’, writes Toni Roldán, director of the Esade Center for Economic Policy & Political Economy (EsadeEcPol), in a recently published Insight paper entitled ‘Economic impact and public policies to guide the transition phase’. How severe the economic fallout is will depend directly on the healthcare scenarios. According to the EsadeEcPol paper, the government should thus ‘focus all its efforts on building the capabilities needed to live in a “low-contact economy” and providing all the support necessary during the transition period in the most flexible manner possible’.
‘We reckon Spain may have between ten and thirty times the detected number of cases, that is, a prevalence of some 6% to 18% of the entire population. That means that, once the current curve of infections and deaths has been flattened, most of the population will still be vulnerable to infection’, explained Antonio García Pascual, a member of the EsadeEcPol international advisory board, visiting scholar at Johns Hopkins University and co-author of the Insight. ‘The economic scenarios awaiting Spain will thus depend on the severity of each new outbreak and that will depend on Spain’s ability to mitigate the incidence of the virus’, he continued.
Economic impact: 15% reduction in GDP in 2020
‘The plan to ease the lockdown in phases announced by the government will not prevent the recurrence of new partial outbreaks at specific times and areas of Spain that lead to intermittent, regional, partial lockdowns in 2020’, said Jorge Galindo, director of economic policy at EsadeEcPol and co-author of the paper. Based on the mobility data published in recent weeks, the authors of the Insight calculate that such partial lockdowns will reduce mobility by 40% to 50%. In the baseline scenario, this would mean that GDP would fall by around 15% in 2020, before bouncing back by 12% in 2021. Unemployment would peak at 22% (or over 30%, if temporary collective redundancy schemes are taken into account). In the best-case scenario, in which the epidemic is more or less brought under control and mobility costs are reduced through greater testing capacity, GDP would shrink by around 9% in 2020. In the worst-case scenario, assuming another outbreak similar to the one in March and April, GDP would shrink by 20%.
Effectiveness of public policies
The likelihood of any one of these scenarios occurring rather than the others in Spain will largely depend on the effectiveness of the public policies implemented. According to the authors of the EsadeEcPol Insight, to achieve the best-case scenario in the sphere of healthcare, ‘Spain must (1) massively scale up the capacity to measure, monitor and isolate individual cases; [and] (2) design a physical distancing model that is precise, modular, conditional and regionalised, and based on early warning indicators and the criterion of the greatest reduction in the rate of infection at the lowest possible socio-economic cost.’
In addition to the measures already announced, to mitigate the fallout for the economy and minimise social suffering, Spain needs to prioritise, first, ensuring the implementation of more flexible mechanisms to help SMEs, the self-employed and vulnerable groups that are not covered or not receiving the necessary cash in time, and, second, extending and making access to temporary collective redundancy schemes more flexible, as they will be a key mechanism for preventing layoffs during the long transition period. Meanwhile, the European Union needs to improve the terms of European Stability Mechanism (ESM) loans to make them attractive to the countries that may need them and define the funding and content of the European recovery fund.
‘The government has begun to implement a plan for lockdown easing in phases based on quantitative indicators that show how the epidemic is evolving, in keeping with the EsadeEcPol recommendations. However, the sustained success of lockdown easing throughout the proposed provisional calendar will depend entirely on our ability to develop ways of measuring the epidemic, tracing contacts and practicing self-isolation. Until those capabilities are assured, the outcome of the plan is uncertain’, concluded Roldán.
El original pone “economía política”. Provisionalmente, he optado por “economic policy” en vez de “political economy” porque es el cargo que aparece en la página correspondiente del EsadeEcPol y en la versión en inglés del Insight. Lo comento sólo por si acaso.
