The Balearic Islands will suffer the greatest impact from the coronavirus crisis according to a new report from the Centre for Economic Prediction, or Ceprede.
GDP is predicted to fall by 2.73% in the Balearics compared to 1.7% in the whole country and at least 11,000 people will lose their jobs in the Islands.
Goldman Sachs is predicting an even worse scenario and said on Tuesday that Spain's GDP will fall 9.7% this year and many other analysts are predicting a spectacular collapse in GDP, but haven't specified a percentage.
Ceprede is sticking with its assessments that the Balearic Islands’ GDP will slump by 2.7% in the Balearics; the Canary Islands will lose 2.1%; Catalonia will drop 1.9%; the Valencian Community -1.8%, Madrid -1.8% and La Rioja -1.8%.
At the other end of the scale, the report says Ceuta and Melilla are likely to be the least affected with GDP down by 1.1%; Extremadura -1.3%, Galicia -1.4% and Asturias -1.4% due to the COVID-19 crisis.
Ceprede also warns that a total of 300,000 people are likely to lose their jobs. 60,000 people in Catalonia will be unemployed because of the health crisis, 52,000 in Madrid, 46,000 in Andalusia and 11,254 in the Balearic Islands.
The Regional Analysis has been carried out supposing that the State of Emergency will last one month and cause complete paralysis in Retail Sales, Accommodation & Hospitality, Travel, Education, Artistic Services & Shows and Sports & Recreational Services.
The report says demand for industrial products has a containment percentage of 80%, while, for retail trade services it stands at 49%.
Ceprede's forecasts are an approximation, since everything seems to indicate that the consequences of the slowdown in the economy could be even greater.
Goldman Sachs says Ceprede's forecasts are optimistic and is forecasting that Spain's GDP will plummet by 9.7% this year, but also predicted that recovery will be solid in 2021.
Goldman Sachs had initially forecast that Spain would grow by 1.8% in 2020, but revised its forecasts in early March to 1.3%, then on Tuesday revised it again sighting a 9.7% drop.
The Organisation for Economic Cooperation & Development warned days ago that the economic impact already exceeds the worst expectations and made it clear that a coordinated effort by Governments and Central Banks to overcome the crisis is extremely urgent.
In early March, the OECD said COVID-19 could halve the growth of the world economy to 1.5% and that a recession would be inevitable in the European and Japanese economies.
"We have already advanced far beyond the most severe scenario expected,” said Ángel Gurría, Secretary General of the OECD earlier this month.
The Foundation of the Savings Banks, or Funcas, revised forecasts it published on January 23 to incorporate a first estimate of the economic impact of coronavirus.
“The inexistence of comparable historical precedents, coupled with the uncertainty regarding the degree of extension that the disease will reach in the coming weeks, its duration and the scope of the containment measures that must being adopted, makes it difficult to make estimates,” said a Funcas spokesperson on March 11.
Just over two weeks ago, Funcas forecast that GDP would grow by 1.4%, one tenth less than the previous forecast, but warned that “if the disease continues to spread significantly over time and forces more severe measures to be taken, these forecasts should be revised downwards again.”
Last Wednesday, the Bank of Spain published its Quarterly Report on the Spanish economy, which does not contain medium-term macro-economic projections due to the uncertainty caused by the coronavirus crisis.
Rafael Doménech, Head of Economic Analysis at the BBVA Research Service, says that if aggregate economic activity decreases by at least 50% while this situation lasts, each week would mean 1% less GDP.
Tourism prospects are extremely uncertain because no-one knows when the State of Emergency in Spain will end or if the tourists will come back when it does.
Already, Easter is a complete washout for the Balearic Islands and the entire Tourism Sector is now looking to May 1 to get things back on track.
But Michael O’Leary, CEO of Ryanair disagrees with that and said last Tuesday that the vast majority of its planes will remain grounded, except to repatriate tourists until June 1.
Spanish and foreign airlines have been forced to cease operations completely and each company appears to be looking at different dates to restart operations, but none of them can guarantee that their forecast is feasible until the State of Emergency comes to an end.
Almost all hotels have carried out an ERTE and are determined to open their doors as soon as possible.
But again there is uncertainty as to whether there will be enough bookings to enable the Hotel Sector to operate normally.
Majorcan Hotel Chains are planning to stagger their openings and say they can’t rule out the possibility that some will not open at all this season.
Hoteliers are only too aware of the enormous difficulties they will face, if and when they do finally open. They have no idea whether the Balearic Islands will recover connectivity from previous seasons or if the Tour Operators will even be in a position to sell packages.
There are so many unknown factors that it’s possible that the Hotel Sector will remain completely closed until July 1, which just days ago seemed unthinkable.