04.11.2020
Testimony before the Parliamentary Budget Committee in relation to
the Draft State Budget for 2021*
Pablo Hernández de Cos
Governor
*Traducción al inglés del discurso original en español
Ladies and gentlemen,
I appear before this Committee as part of the process to discuss and approve the State and
Social Security Budget for 2021. The main aim of this Budget should, in my view, be to
provide for the recovery of the Spanish economy in the coming quarters and to mitigate the
considerable adverse impact caused by the COVID-19 pandemic to our economic growth
and welfare.
I shall begin by first describing the recent behaviour of the Spanish economy and, against a
background marked by exceptional uncertainty, its possible course in the coming quarters,
in light of the Banco de España's projections. This description will allow me to assess the
Government's macroeconomic forecast which, as is habitually the case, frames the Draft
Budget. Secondly, I shall offer my view of the main aspects of the Draft Budget for 2021,
including the fiscal policy stance, its composition and the risks to the budget deficit target
being met. Lastly, I shall set out what I consider to be the most significant challenges for
Spanish fiscal policy in the medium term.
1 The Spanish economy: recent developments and outlook
1.1 International environment
As I stated in early October before the Economic Affairs and Digital Transformation
Committee in this House, the COVID-19 pandemic has prompted unprecedented disruption
to economic and social dynamics both in Spain and globally. It is an event which, given its
exceptional rarity and marked impact, we economists colloquially dub a "black swan".
In the first half of 2020, the health crisis and the measures to contain it caused a deep
recession worldwide, which peaked last spring.
Since then, economic activity has embarked on a path of recovery which, however, has
proven incomplete, uneven and fragile.
It is incomplete or partial because, despite the rises observed in recent months, activity and
employment are still clearly down on their pre-crisis levels in virtually all countries.
Uneven, not only at the international level but, in particular, from the sectoral standpoint, as
some sectors of activity involving a substantially high degree of social interaction continue
to be appreciably more affected than the rest.
And lastly fragile because, as we have seen in recent weeks, in the absence of an effective
medical solution for the virus, the intensity of the current path of recovery, and indeed its
continuation, are highly dependent on how the pandemic evolves and any fresh outbreaks.
As a result, global economic developments in the coming quarters are subject to very high
uncertainty.
The latest IMF forecasts released in early October illustrate the extraordinary impact the
pandemic has already had on economic growth globally and the incomplete nature of the
ongoing recovery.
In particular, the baseline scenario of these forecasts suggests that, following growth of
2.8% in 2019, global GDP will shrink by 4.4% in 2020. This contraction will be more acute
across the advanced economies than in the emerging countries (with declines of 5.8% and
3.3%, respectively) and, among the former, it will bear down particularly on the euro area,
where output is expected to fall, according to the IMF, by 8.3% this year.
In 2021, the IMF expects activity to pick up relatively strongly in virtually all economies,
entailing growth of 5.2% globally. However, in most countries, despite this recovery, the
level of GDP in 2021 would still be below that recorded in 2019 before the outbreak of the
pandemic. The gap in the advanced economies as a whole would be about 2 percentage
points (pp).
In the case of the euro area, the contraction in economic activity has been across the board
in the year to date, despite the partial recovery posted in the summer months following the
easing of the lockdown measures deployed in the first half of the year. Euro area GDP in Q3
was thus still 4.3% lower than in 2019 Q4. In the four biggest euro area economies, the loss
in output was more marked in Spain (9.1%) than in Italy, France or Germany (4.5%, 4.1%
and 4.2%, respectively).
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.
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 progressive lifting of these restrictions in Q2 allowed a gradual recovery in activity to
ensue. Indeed, in Q3 as a whole, GDP is estimated to have risen by 16.7% on the previous
quarter, according to INE's flash QNA estimate released last Friday.
Notably, in any event, this high quarter-on-quarter rate is largely a statistical consequence
of the marked fall-off in output in the two previous quarters. Hence, and returning to the
incomplete nature of the current recovery I referred to earlier, it is important to bear in mind
that Spanish GDP in Q3 was still 8.7% down on the same period a year earlier and 9.1%
below the end-2019 figure.
Moreover, as I shall set out in detail later, the intensity of this recovery will have been
adversely affected since early July by the fresh outbreaks of the virus in our country, which
have prompted a fresh deterioration in the epidemiological situation.
GDP aside, the pandemic has also had a very significant negative impact on the labour
market. Part of this impact has been through the decline in social security registrations,
which at end-September were 2.3% below their level in the same period in 2019 (almost
440,000 fewer registrations) and 2.7% down on the end-2019 figure (532,000 fewer
registrations). An even greater part of the negative impact of the pandemic on employment
has taken the form of the recourse to furlough schemes (ERTEs by their Spanish
abbreviation). Thus, at end-September, the employment of almost 730,000 workers had
been fully or partly suspended. And while this figure is far below the peak recorded in May
(3.2 million people on average for the month), it remains high.
The combined impact of these two channels can be seen in "actual" registrations, a variable
constructed by stripping out workers on furlough schemes from the social security
registrations figures. Although this indicator has been gradually improving since May, when
it posted a year-on-year decline of 20.9%, it was still showing a fall of 6.2% in September
(on average monthly data) compared with the same period a year earlier.
The increase in the unemployment rate is being partly contained, so far, by the resort to
furlough schemes (ERTEs). However, according to the Labour Force Survey figures for Q3
published last week, in this period the unemployment rate is estimated to have risen to
almost 16.3% of the labour force. This is the highest rate since early 2018 and is 2.5 pp
above the figure observed in 2019 Q4.
Public finances have also been severely affected in recent months as a result of the
pandemic's direct impact on health spending, the effect of the automatic stabilisers and the
various measures implemented by the Government to alleviate the impact of the economic
crisis on household and corporate income.
Hence, the general government deficit rose strongly in the first half of the year to 6.9% of
GDP in June in cumulative 12-month terms, more than 4 pp above the level recorded in
2019. This figure reflects both a most significant decline in revenue and a notable increase
in expenditure, of which more than 70% is directly related to the pandemic. The latest data,
which exclude local government budgetary developments, are along these same lines: they
show a budget deficit to August of 7.8% of GDP in cumulative 12-month terms, 4.9 pp up
on the end-2019 figure.
Besides the highly significant impact the pandemic has exerted on the main aggregate
indicators of activity, its influence, and that of the measures implemented to contain it, has
been extraordinarily asymmetrical across sectors, firms and workers.
For instance, some services sectors linked to the hospitality industry and to transport, where
activity habitually requires relatively high levels of social interaction, have since the start of
the pandemic shown much more marked declines than those seen in the other sectors (e.g.
manufacturing) across a wide range of activity, confidence and employment indicators. The
regional distribution of the declines in activity and employment has also been very uneven.1
The crisis has also had a very uneven impact among workers. Thus, insofar as the proportion
of young workers and low wage earners in the sectors most affected by the pandemic has
been relatively high,2 the crisis has borne down particularly sharply on those workers
showing a greater initial degree of vulnerability and with more limited resources to sustain
their spending. This might influence the future path of inequality in Spain.3
As regards business dynamics, since the onset of the crisis the number of firms registered
for social security purposes has fallen most appreciably, by almost 84,000 firms from
endFebruary to end-September. That marks a year-on-year decline of 6.1%, which is down on
the peak in spring (10.5% in April), but still very high.
This evidence is consistent with the analyses conducted by the Banco de España. These
suggest that the unprecedented fall witnessed in business turnover in recent months will
have significantly raised firms' levels of financial vulnerability.
In the non-financial business sector as a whole, the percentage of firms whose net worth is
less than half their net debt is estimated to have risen from less than 20% pre-pandemic to
somewhat over 25%. This percentage will have increased more significantly at SMEs (by
around 6 pp) than at large corporations (around 2 pp) and, by sector, most sharply in tourism
and leisure (over 15 pp), motor vehicles (over 10 pp), and transport and storage (around
7 pp).
1.3 Macroeconomic projections of the Banco de España
The high uncertainty over the future course of the health crisis made it advisable for the
latest Banco de España projections released on 16 September to envisage several
alternative scenarios. This had been the case in the two previous forecasting exercises, also
influenced by the pandemic. Two scenarios were set out, the essential differences lying in
how it was assumed the epidemiological situation would evolve both in the final stretch of
September and in the following quarters and, consequently, in the severity of the restrictions
on mobility and activity that it would be necessary to deploy to contain the pandemic.
The design of scenario 1 thus considered a relatively favourable epidemiological path in the
short term. And although the emergence of fresh outbreaks was considered, their
containment would only require restrictive measures of limited scope, from the geographical
standpoint and from that of the productive sectors affected. In this respect, the impact of
these new restrictions on activity would, it was assumed, be relatively limited.
Under scenario 2, by contrast, fresh outbreaks on a greater scale in the short term were
envisaged. It was admittedly assumed that the containment of these outbreaks would not
require the application of such strict and widespread social distancing measures as those
in place before the start of lockdown-easing last spring. But it was believed these limitations
would have an appreciable adverse effect on activity. In particular, the scenario envisaged
the possibility that, in addition to causing more intense harm to activity in the services
sectors, these new restrictions could also bear down directly (and not only through
knockon effects) on the degree of robustness of the other productive sectors.
In these extraordinarily uncertain circumstances, a very significant deterioration is in any
event expected in the Spanish economy's levels of activity and employment, and in its
public finances for 2020 as a whole. And this negative impact will, moreover, be relatively
persistent.
In particular, taking the above-mentioned Banco de España scenario 1, GDP would contract
by 10.5% in 2020 (12.6% under scenario 2), and pre-crisis levels of activity would not be
regained until late 2022, when the level of GDP would still be some 2 pp below that recorded
at end-2019 (more than 6 pp below in scenario 2). And this despite the fact that output
would grow with some momentum in 2021 and 2022, at rates of 7.3% and 1.9% under
scenario 1, and of 4.1% and 3.3% under scenario 2.
This adverse impact of the pandemic on Spanish GDP would generally be more marked
than that which most developed countries would undergo. Indeed, institutions such as the
IMF, the OECD and the European Commission have testified as much in their forecasts.
This would be the consequence of the conjunction of several factors. They include the
relatively more unfavourable course of the pandemic in our country. Thus, for instance, at
the height of the first wave, the number of daily deaths per 1,000,000 inhabitants stood at
over 17 in Spain, compared with fewer than 14 in Italy, 9 in the Netherlands and 3 in
Germany. Moreover, the second wave of the virus began in Spain almost two months before
it did in the rest of the euro area. Compounding this was the effect of the greater stringency
of the lockdown measures during the early stages of the pandemic in the spring. Lastly, the
different structural aspects of the Spanish economy also come into play: the high temporary
employment ratio in the labour market, the prevalence of SMEs in the productive system
and the high weight of the so-called "social sectors" in GDP. These aspects make our
economy particularly vulnerable to this shock.
While the temporary employment ratio in Spain averaged 25.2% over the past decade, it
was below 14% in the other euro area countries. In 2019, moreover, 78% of firms in Spain
had fewer than five employees, clearly higher than the figure of 69% for the euro area on
average. Also, the sectors of activity most affected by this crisis (hospitality, transport and
leisure) account for approximately 13% of the Spanish economy, compared with around
9% of the euro area economy.
As regards the behaviour of the labour market in the coming years, employment in terms of
hours worked is expected to move on a very similar path to that of economic activity,
showing declines of over 11% in 2020 and a recovery thereafter. The unemployment rate is
expected to increase very significantly both in 2020 and 2021 and, despite falling in 2022,
will still remain over 18% under scenario 1 and over 20% under scenario 2.
Concerning public finances, the general government deficit is forecast to increase strongly
in 2020, to 10.8% of GDP under scenario 1 and 12.1% under scenario 2. Although this ratio
is expected to fall gradually in 2021 and 2022, the budget deficit will still be very high at the
end of the projection horizon, standing at almost 6% under scenario 1 and at slightly over
8% under scenario 2. The government debt ratio is expected to rise very significantly in
2020, by between 20 pp and 25 pp, standing at the end of the projection horizon at 118%
of GDP under scenario 1 and at 128.7% under scenario 2.
Lastly, in the case of consumer prices, the scenarios presented in September envisaged
that, following the notable slowdown in recent months, the headline inflation rate would be
negative for 2020 as a whole (-0.2% under scenario 1 and -0.3% under scenario 2). In the
following two years it would only rise very gradually (to 1% and 1.2% under scenario 1 and
to 0.8% and 1.1% under scenario 2), underpinned by the progressive recovery in aggregate
demand and some quickening in the energy component of prices.
Yet since these scenarios were released in September, various indicators have been
published which enable their current validity to be assessed, albeit qualitatively. In any
event, the Banco de España will update its forecasts in December, in a joint exercise with
the Eurosystem.
First, it is important to note that the INE's preliminary estimate for the quarter-on-quarter
GDP growth rate for Q3 a few days ago was, at 16.7%, practically in line with the rate
estimated in early September in the context of scenario 1 (16.6%).
However, as I pointed out earlier, a wide range of indicators would suggest that the recovery
progressively lost momentum in Q3. This would essentially be related to the rapid increase
in the number of COVID-19 infections observed in Spain in recent months. That is to say, if
economic activity in Q3 has managed to pick up in keeping with the more benign scenario
of the two projected in September, the path of the disease and the necessary containment
measures introduced in recent weeks might be running more in step with the assumptions
included under scenario 2.
Thus, for example, the composite PMI, which habitually acts as a leading indicator of the
future performance of the economy, fell in Spain in August and September, interrupting the
rising path on which it had held in the previous months. Further, the improvements seen
since the latter part of Q2 in Google's daily mobility indicators, and in those for air and
motorway traffic, are estimated to have halted (and even reversed in some cases) since
midJuly.
This economic recovery path in Q3, and the fact that, in Q4 to date, the epidemiological
situation has worsened acutely in Spain and in most of our neighbouring countries, have
prompted the relatively widespread application of fresh restrictions on mobility and activity
in certain sectors. On the basis of these developments, it seems plausible to anticipate that
economic activity in the final stretch of the year and in early 2021 will be less dynamic than
was expected under September's scenario 1 (which envisaged a quarter-on-quarter
increase of 3.9% in 2020 Q4 and of 1% in 2021 Q1).
However, it is important to note that the volume of conjunctural information currently
available to us to estimate economic developments in Q4 is still very limited. Accordingly,
these considerations are subject to very high uncertainty. In this respect, the social security
registrations figures for October would suggest the recovery in this variable had flattened
somewhat (in contrast to preceding months, the year-on-year rate of change in registrations
did not fall in October and held at -2.3%). Also, the manufacturing PMI for October,
published this very week, has shown a slight rise in business confidence in the sector, both
in Spain (+1.8 points) and in the euro area as a whole (+1.1 points).
There has been a clear downward surprise in inflation in recent months (it dipped to -0.9%
in October according to the CPI leading indicator published by the INE last week). This has
essentially been due to the behaviour of the prices of services (especially those relating to
tourist and leisure activities) and of non-energy industrial goods (weighed down by the
relative weakness of demand). This would be consistent with inflation rates in the coming
quarters even more modest than those foreseen in the September projections exercise.
1.4 The main conditioning factors of economic activity in the coming quarters:
risks and policies
The macroeconomic outlook I have described is subject to extraordinary uncertainty and
the underlying risks are tilted to the downside.
The key aspect influencing Spanish and global economic developments in the short term is,
unquestionably, how the epidemiological situation will evolve. Considerable risks persist as
to the future course of the pandemic. In particular, we cannot rule out here that unfavourable
new developments will arise, whether because the worsening infection figures we are seeing
during the second wave continue for a lengthy period of time, because it is necessary to
resort to more severe containment measures, or because an effective medical solution does
not become available in the time frame the scientific community has suggested as most
realistic, namely around mid-2021. Should these risks materialise, they would weigh down
on the recovery in economic activity envisaged in the above-mentioned scenarios. And we
cannot rule out very marked effects as a result of abrupt and potentially non-linear changes
in the dynamics of capital markets, the stability of financial institutions or agents'
confidence.
Setting aside how the pandemic may evolve, some significant sources of uncertainty remain
on the external front. One of these is the possibility that the Brexit negotiations will conclude
without an agreement at the end of the transition period, an aspect on which risks currently
remain tilted to the downside. A further source of uncertainty concerns future US-China
trade relations. Undoubtedly, this matter will be greatly influenced by the outcome of
yesterday's US presidential election, though it is still early to accurately gauge all the
ensuing implications.
On the domestic front, a significant factor for the Spanish economy, not only in the coming
quarters but also in the medium and long term, is unquestionably our ability to mobilise and
efficiently assign the European funds available under the Next Generation EU (NGEU)
programme.
In the September Banco de España forecasting exercise I have referred to in my address
today, the impact of this programme was not explicitly incorporated into the projections,
since at that time there was notable uncertainty over many key areas in relation to the use
of these funds. However, we did publish an analytical text in which, under different
assumptions about the execution time of the projects requested, the types of projects and
how they would be financed, an initial approach was made in respect of their potential
macroeconomic impact.4
The results of this analysis suggested that the European programme, given the potential
volume of funds it could mobilise, has the capacity to become a significant factor of support
to the Spanish economy's recovery in the wake of the impact of COVID-19. Also, and in
particular, it could be a unique lever for raising our modest potential growth rate, especially
if the design and prompt implementation of new public investment projects exerting a high
multiplier effect on activity were pursued, accompanied by the introduction of structural
reforms providing for the more efficient functioning of our economy as a whole. In this
respect, the NGEU programme entails an upside risk to our September forecasts that I shall
quantify later.
Admittedly, since the publication of our latest projections more details have become known
on the use that could be made of the NGEU programme in Spain in the short term (many of
which are included in the Draft Budget we are addressing here today). But notable
uncertainty persists over the ultimate level of actual execution of this programme in Spain,
and over the capacity of the potential projects finally selected and implemented to increase
the Spanish economy's growth potential.
I shall refer again to this matter when discussing the macroeconomic forecasts of the Draft
Budget. But first, allow me to mention one final factor which, undoubtedly, has critically
influenced recent Spanish and global dynamics. It is a factor that will continue to play a key
role in the coming quarters and years in managing and overcoming this crisis. I refer here to
the economic policy response.
To date, the measures taken by economic policymakers (in the fiscal, monetary, labour
market and financial areas) in response to the outbreak of the pandemic have most
significantly mitigated its impact. They have eased the downturn in real activity and in
economic agents' income and liquidity, and they have headed off the materialisation of
systemic risks to the functioning of the financial markets and banks' financial stability.
From the outset of the health crisis, fiscal policy, both in Spain and in most developed
countries, has reacted resolutely. As you are all aware, particularly notable in Spain have
been the furlough schemes (ERTEs) in respect of employment and the public guarantees for
financing granted by credit institutions to firms. These were forceful measures, aimed at
mitigating the impact of the crisis on employment and on households' and firms' income
and liquidity.
In the monetary policy realm, where the Banco de España plays an active role as a member
of the Eurosystem, the action of the ECB, through a wide range of measures, has been
pivotal. It has stabilised financial markets throughout the euro area, avoiding financial
fragmentation across countries, and supported the flow of bank lending, which is so
important for financing households, SMEs and the self-employed. The ECB response has
thus exerted a significant stabilising effect on economic activity in Spain and in the euro
area as a whole.
Looking ahead, the Spanish and global economic outlook will hinge crucially on how these
policies can be adapted to an extremely uncertain and changing environment, so a balance
may be struck between their effectiveness and the efficient use of public funds.
In the specific area of budgetary policy, and within the time horizon covered by the Draft
Budget for 2021, efforts should continue to be geared, as was the case throughout 2020,
to combating both the health crisis and the adverse economic consequences of the
lockdown measures introduced to alleviate it.
On the health front, combating the virus obviously continues to be a priority objective until
an effective medical solution has been developed. This may require continuing to adapt the
capacity of the health system to ease the effects of the second wave on public health and
to manage potential and subsequent fresh outbreaks. At some point further ahead, the
objective must be to purchase the necessary doses of the treatment or vaccine, for
distribution to the population at large.
Beyond the health sphere, the short-term priority must be to continue to support households
and firms until a sound and sustained recovery is in place. This is something we will very
likely not see until a medical solution is available that will render restrictions on people's
movements and on certain sectors of economic activity unnecessary. Until this is the case,
budgetary support for private economic agents is crucial to minimise the risk that the
present health and economic crisis may trigger a financial crisis, which would entail much
higher and longer lasting costs in terms of production and employment.
However, these support measures must now be more selective, concentrated on the
population groups and businesses most affected by the crisis, to maximise their
effectiveness in a setting in which public funds are necessarily limited. This was the
backdrop for the extension of the furlough schemes up to January 2021 agreed between
the Government and the social agents. In the same spirit, the Government should be
prepared for the possibility that, should the course of the pandemic worsen, it may be
necessary to introduce additional measures or to extend or recalibrate those already in
place.
In addition, there needs to be a transition from the current income support policies for
households and liquidity and funding support policies for businesses towards measures
geared to fostering medium and long-term growth. In particular, this requires that budgetary
policy favour, rather than hinder, the necessary reallocation of resources. This is how the
new incentives for furloughed workers to return to work, envisaged in the latest extension
of these measures, should be understood.
Moreover, although the structural changes that may be triggered by this crisis have become
a recurrent subject of debate, the specific nature of these changes is as yet uncertain. On
the one hand, it is noticeable that as a consequence of the pandemic, certain
transformations that were already under way, such as teleworking or digitalisation, are
accelerating. Yet on the other hand, and by contrast to the experience of the previous crisis,
which saw structural correction of certain industries in Spain, such as construction and
financial services, that were oversized, it is not at all clear that the sectors currently most
affected by the social distancing rules resulting from the pandemic will see a permanent fall
in their demand once we have overcome the health crisis. In consequence, it is by no means
easy to fully anticipate all the structural changes that will arise as a result of this crisis. This
advises maintaining certain support measures for the sectors most affected until such time
as these uncertainties are dispelled.
However, the necessary flexibility must be maintained so as to ensure that policies can be
tailored to facilitate the reallocation of resources to more dynamic areas of activity. The
pandemic is having a particularly harsh impact on the tourism and hospitality sectors, both
of which have higher levels of relatively low-skilled labour and in many cases with temporary
employment contracts. Transformation of the productive system will require the reskilling of
these segments of the working population, to allow them to participate in the economic
sectors of the future. Active employment market policies should play a key part in this
transition, together with training and retraining of the workers most affected by this crisis.
In this setting, making efficient use of the Recovery and Resilience Facility to enhance the
economy's human and physical capital could be extremely helpful, a question that I will
address in more detail a little later.
Moreover, the need to make efficient use of public funds means that their use must also be
appropriately timed. In this setting, particular care will be needed with the adoption of
measures that may lead to a permanent increase in expenditure levels.
1.5 Draft Budget macroeconomic forecast
The macroeconomic forecast underpinning the Draft Budget expects real GDP in Spain to
fall by 11.2% in 2020, followed by growth of 9.8% in 2021. In the fiscal sphere, it envisages
a correction of 3.6 pp in the general government budget deficit between 2020 and 2021,
from 11.3% of GDP this year to 7.7% of GDP next year.
In such an extraordinarily uncertain and changing environment as the present one, we need
to be especially cautious when assessing these forecasts and comparing them with those
made - mostly at different moments in time - by other analysts. In my view, three points
should be highlighted.
First, the starting point for this Draft Budget, which is none other than the forecasts made
for the current year. In general, these are consistent with those published by the Banco de
España in our latest projections report. In particular, the scale of the possible fall in GDP in
Spain in 2020 - 11.2% according to the macroeconomic forecast underpinning the Draft
Budget - is more or less mid-range between the two projection scenarios presented by the
Banco de España in September, which envisaged a decline of 10.5% under scenario 1 and
of 12.6% under scenario 2. This is also true for the budget deficit estimated for 2020 in the
Draft Budget forecast, which is 11.3% of GDP, virtually mid-range between the deficit
envisaged under scenario 1 (10.8%) and scenario 2 (12.1%).
The macroeconomic forecast underpinning the Draft Budget also appears to be
considerably in line with the projections made by other analysts for these sam