Spain | Macroeconomic impact of COVID-19 on the Spanish economy

We use a dynamic general equilibrium model to analyze the contribution of structural disturbances that explain the main macroeconomic aggregates in COVID-19 and the damping effects of economic policies in Spain.

Key points

• Key points:
• The results highlight the importance of total factor productivity and demand factors in the COVID-19 crisis.
• Its unprecedented negative contribution has been partially offset by government expenditure, transfers to the private sector and the credit boost, especially from companies.
• Going forward, it will be essential to avoid any permanent effects on GDP and jobs resulting from this crisis.
• Demand and income policies are fundamental in the short term to partially offset the drop in activity, but they will not be enough to put the economy back on track.
• Taking advantage of NGEU with reforms to generate more efficient, competitive, and flexible markets, and to encourage the accumulation of physical, technological, and human capital to increase productivity and employment, and to ensure improved social welfare and equal opportunities.

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