High uncertainty persists over the intensity of the recovery in the closing months of the year, given how the pandemic has recently evolved in Europe. The across-the-board roll-out of new containment measures to counter the health crisis might lead to a significant slowdown in the rate of growth of activity, and even to a contraction, at least in some countries or sectors. For the year as a whole, the baseline scenario of the ECB’s latest forecasts points to an 8% reduction in euro area GDP in 2020, followed by a 5% increase in 2021. The estimated contraction for this year widens to 10% in the harshest scenario (based on a greater impact of the pandemic, with more severe restrictions and a delay in any possible health-related solution), which would moreover entail a very slight recovery, of 0.5%, in 2021. As to the inflation outlook for the area, the ECB augurs a very weak increase this year, of only 0.3%, rising in 2021 to 1%, a figure nevertheless some distance off the medium-term price stability objective. 2  1.2  Recent developments in the Spanish economy  In Spain, the impact of the pandemic on economic activity has been particularly marked, and much more acute than in past recessions. GDP duly posted historical quarter-onquarter contractions in the first half of this year (5.2% in Q1 and 17.8% in Q2), essentially as a result of the rapid spread of the virus and of the measures of confinement and restriction of activity adopted to contain the pandemic.
The macroeconomic forecast underpinning the Draft Budget also appears to be considerably in line with the projections made by other analysts for these same variables in 2020, especially considering the high level of uncertainty. Thus, in the Consensus Economics Forecasts panel published in mid-October, the analyst consensus pointed to a contraction in GDP of 12.1% and a budget deficit also of 12.1% in 2020. 14  A second noteworthy aspect of the macroeconomic forecast accompanying the Draft Budget is that it expects GDP to grow by 9.8% in real terms in 2021 (10.8% in nominal terms). This is assuming that some € billion will be available from European funds in 2021 (around 2.4% of estimated GDP for 2020), with a positive impact on the rate of growth of GDP in that year of 2.6 pp. As I indicated earlier, the Banco de España’s latest projection exercise did not include the potential positive impact on activity of the funds that the European Union has made available to Member States, through the NGEU programme, to support the ongoing economic recovery and structural transformation. In consequence, in order to use the Banco de España’s projection scenarios as a benchmark for comparison, the GDP growth estimate for 2021 in the macroeconomic forecast underpinning the Draft Budget must be considered having discounted the impact of the projects financed through the NGEU programme. This gives GDP growth of 7.2% in real terms (8.1% in nominal terms).