It is true, however, that economic activity has begun to regain momentum as the lockdowneasing plan has moved forward. Should this momentum continue, it would open the way for a more favourable performance in the second half with year. Nonetheless, this is subject to considerable uncertainty. Reflecting this uncertainty, the latest Banco de España projections include several scenarios. The first, “early recovery” scenario depicts a situation in which no significant obstacles would emerge in the coming quarters. Under this scenario, output would fall by 9% in 2020. The second, “gradual recovery” scenario incorporates a more persistent impact of the decline in activity during the lockdown phase and includes fresh outbreaks of the disease of moderate intensity. That would lead to an 11.6% drop in GDP this year. In both cases, we would be before the biggest fall in activity in a single year, and this despite the fact that GDP will grow at a very marked quarter-on-quarter rate in the second half of the year. These forecasts also point to persistent effects in the medium term. In 2022, GDP will stand, respectively, around 4 pp and 6 pp below the level projected in December 2019; the unemployment rate will hold at over 17%; and the public debt/GDP ratio will be between 115% and 120%. Further, we cannot rule out other, more adverse scenarios, resulting, for instance, from the disease unfolding more adversely or from greater harm being inflicted by the crisis on the productive system.
This advises studying the possibility, depending on how economic activity evolves, of extending the public guarantee mechanisms. In re-designing the latter, priority of access to such resources should be for firms with sound viability prospects. The crisis will significantly impact banks’ credit portfolios. The declines in GDP projected for 2020 under the scenarios previously outlined exceed those of any stress test in the past; yet it is true that, if the rebound in activity forecast for 2021 and 2022 were to materialise, this severity would be significantly mitigated. Moreover, the crisis will affect banks differently in terms of their business model and of the distribution of their exposures to the sectors and regions most affected by the pandemic. Overall, then, we must remain vigilant to stave off the risks to financial stability derived from this crisis, and be ready to respond forcefully at the European level if these risks materialise. Second, in the domestic arena, some of the measures already applied should be temporarily extended and recalibrated. It seems right to retain some of the income support instruments for the most vulnerable households, though it is essential they remain focused and designed so as not to distort, for example, labour market participation decisions. It would also be wise to extend furlough-like schemes in certain sectors and firms that will continue to be very affected by social distancing measures.