This is why the Banco de España opted, in its publication on 20 April, to prepare several alternative scenarios using different analytical tools.2 In any of the scenarios considered, confinement would translate into a very severe contraction in Spanish GDP in 2020, all the greater the longer the period during which it is necessary to retain the restrictions on economic activity, and with greater risks that the 2  See Banco de España (2020), “Reference macroeconomic scenarios for the Spanish economy after Covid-19”, Analytical Articles, Economic Bulletin, 2/2020. 11  liquidity problems many economic agents are currently facing will lead to situations of insolvency. Looking ahead to next year, these scenarios outline a recovery in activity and employment which, nonetheless, would be insufficient for GDP to attain its pre-COVID-19 trend level. Specifically, in the two scenarios recently published by the Banco de España that seem most realistic at present, having ruled out the third which projected a shorter and more moderate recession, GDP is expected to fall by 9.5% and 12.4%, respectively, in 2020 (and post subsequent increases of 6.1% and 8.5% in 2021).3 The figures in the first of these scenarios do not differ significantly from those reported by other national and supranational institutions, public and private alike. Thus, for example, the Spanish Government, the International Monetary Fund (IMF) and the European Commission have recently projected declines in our economy of 9.2%, 8% and 9.4% for 2020, respectively.
Christian Noyer: The ECB is ready to fight deflation Opinion piece by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, in Wall Street Journal, 21 November 2013. *  *  *  There is a lot of talk nowadays about the risk of a “lost decade” in the euro zone, with a conjunction of no growth and deflation. Current forecasts point to very low inflation in the foreseeable future. For the euro area as a whole, inflation is projected to remain at around 1.5% in the coming year. However, low inflation is very different from deflation. Deflation is a cumulative process of decreasing prices, wages and output fueled by negative expectations. Deflation is a pernicious spiral. It increases the burden of debt and creates an incentive to defer consumption and investment. Deflation is especially dangerous because once the process becomes entrenched, it becomes very difficult to stop. At the moment there are no signs of general deflation in the euro area and most indicators point to a very low risk. Inflation expectations in particular remain firmly anchored in positive territory and, for the long term, stand at levels close to the European Central Bank’s definition of price stability. As usual, inflation rates vary in the different economies of the euro area. In some peripheral countries, inflation is particularly low.