the improved global economic outlook and, in the case of crude oil, with some supply - side factors. certain temporary factors have also affected services and non - industrial energy goods prices. these factors will give rise to high inflation volatility in the coming months. there has been much discussion in recent weeks on whether these developments might be a prelude to a period of higher inflation. in my opinion this is unlikely, given the weakness of demand and the high degree of cyclical slack. in the ecb projections, euro area inflation would, at end - 2023, still be some distance off the medium - term monetary policy objective of 2 %. in spain ’ s case, inflation would average 1. 2 % for 2023 under the baseline scenario. the risks surrounding these projections remain tilted to the downside in the short term under the baseline scenario. such risks would be essentially linked to more acute episodes of contagion or slower progress in immunisation. beyond the short term, uncertainty has tended to abate as the effectiveness of the vaccines has been confirmed. and that has lessened the likelihood of more unfavourable scenarios materialising. uncertainty is also lower as a result of the fiscal package approved in the united states and the agreement for the united kingdom ’ s withdrawal from the european union. overall, risks are more balanced in the medium term than they were some months back. economic policy support should be maintained in the short term … what is the role of economic policy in the setting described? in my view, maintaining the exceptional support measures for the economy is warranted. this support is crucial for preventing the crisis from adding a financial component that would make it deeper and more lasting. this is the course of action monetary policy has followed. in december, we extended our pandemic purchases programme to at least march 2022 to ensure that financing conditions remain favourable. more recently, to counter the rise in long - term interest rates observed in recent months, in a setting in which our inflation forecast is far off our objective and below that expected before the crisis, we have stressed we will use the flexibility of our pandemic programme to increase purchases in the coming months. these decisions lead me to emphasise the importance of maintaining a high degree of monetary accommodation so that fiscal policy may, in turn, retain a very high degree of support to the economy until a firm recovery is in place. in banking, and given the crucial role this sector has still to play, we supervisory authorities have continued

29. 03. 2021 the spanish economy and the covid - 19 crisis : assessment, outlook and challenges europa press informative breakfast pablo hernandez de cos governor * english translation of the original speech in spanish good morning, ladies and gentlemen. i would like to thank the organisers of this event for their kind invitation. i shall begin with a brief assessment of the period since the covid - 19 crisis broke. i shall then set out the banco de espana ’ s view on the outlook for the spanish economy. finally, i shall describe the medium - term economic policy challenges at the national and european level. taking stock of a year of pandemic : an unprecedented, persistent and uneven impact covid - 19 has caused a global economic recession of an intensity which, in most geographical areas, is unprecedented. the crisis is, moreover, proving very persistent : as of today the pre - pandemic levels of activity have not yet resumed in most countries. indeed, the successive waves of the pandemic have checked the recovery, particularly in the sectors most exposed to the restrictions. in spain, this impact is particularly marked. gdp declined by 10. 8 % in 2020 as a whole, a slump appreciably greater than that in the euro area ( - 6. 8 % ). at end - 2020, spanish gdp was still 8. 9 % below its pre - pandemic level, while this gap was 4. 9 percentage points ( pp ) in the euro area. several reasons account for this more pronounced impact in our country. one was the greater intensity of the pandemic initially, which led to harsher containment measures in spring last year. another was the greater weight of the sectors most affected by these measures. but the impact is also the outcome of the smaller size, on average, of our firms. smes are less adaptable to this shock, given that they usually face greater obstacles in gaining access to external financing ; their fixed costs are, in proportion to their turnover, higher ; and their levels of digitalisation are generally lower, which hampers their access to remote working. the first two editions of the banco de espana ’ s survey on business activity confirm these circumstances. the impact of the crisis has been very uneven, as the sectoral outlook evidences. thus, while effective social security registrations1 were, in february, 6. 8 % down on their prepandemic level, the figures were significantly worse in the sectors whose activity has most