Indeed, the notable reduction in business activity further to the restrictions associated with the state of alert prompted a much sharper decline in non-financial corporations’ operating revenue than that in the payments they must meet. The latest Central Balance Sheet Data Office figures give an idea of the severity of this shock to firms’ liquidity. There was a strongly adverse impact on these agents’ profits already in Q1, despite the fact that the sharp contractions in activity and operating revenue associated with the declaration of the state of alert only affected the last two weeks of this quarter. The reduction in the return on assets for the overall sample of firms was so significant that it pushed ROA below the cost of borrowing, a development not seen since 2014. The information on bank lending shows firms resorting to this source of financing to cover a large portion of these liquidity requirements. Specifically, the outstanding balance of bank financing granted to Spanish non-financial corporations rose to 8.7% in May after having shrunk by 1.1% year-on-year in February. And the preliminary data for June would suggest that this trajectory has been holding in the most recent period. Yet for financial institutions to have been able to meet such a notable increase in firms’ applications for credit, the contribution of the support measures launched at both the European and national levels has been decisive.
In their evaluation of Swedish monetary policy in the period 1995–2005, Giavazzi and Mishkin say that this was a sign that monetary policy had been too tight from the beginning of 2002.4 I do not agree with them. Looking back after the event, we can perhaps say that a couple of repo rate increases in 2001 and 2002 could have been avoided. The previous Governor of the Riksbank, Lars Heikensten, also admitted this at a hearing in the Riksdag Committee on Finance on 1 April 2004. But my view is that the repo rate was then reduced too much and was too low for too long. I can see four factors that support this. First, resource utilisation was probably higher than the Riksbank then estimated. The GDP gap is difficult to calculate, particularly at the end of a time series and in connection with severe downturns. According to the two GDP gaps presented in the Monetary Policy Report in February, the GDP gap prior to the crisis was approximately +4 per cent. My own assessment is that the GDP gap was in fact approximately +2 per cent.5 However, the fact that resource utilisation was so high was not as apparent before the crisis. This can be seen, for example, by comparing the calculations of the GDP gap in real time, that is at the point in time concerned, and the most recent calculations. The calculations in real time show that the GDP gap was actually assessed as relatively normal before the crisis (see Figure 6).