Spain | NGEU: Turning a delay into an opportunity

Summary

The NextGenerationEU program should never have been perceived—or explained as—some sort of countercyclical fiscal policy. It is in fact an opportunity to take a first step toward a genuine transformation of the Spanish economy.

Key points

• Key points:
• Although the rebound in the European economy has been faster than in the immediate aftermath of the sovereign debt crisis, it has been slower than in the United States. One reason behind the difference is the slow rollout of NGEU funds.
• A year ago, at BBVA Research we assumed that €10 billion to €15 billion would flow into the Spanish economy and expected output would grow by 6.5% in 2021. Today, we expect GDP to have increased by just 5.1%, partly because disbursements were less than €5 billion.
• Going forward, the funds still to come could be overwhelming. It should be borne in mind that Spain is still waiting to request €70 billion corresponding to recovery plan loans (so far there are only plans to spend the €70 billion in transfers).
• Given the funds yet to be spent, it is important to shift the focus from the rate at which funds will arrive to their ultimate impact on productivity, employment, inequality and environmental sustainability.

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