MADRID: The Bank of Spain on Tuesday lowered its forecast for economic growth this year due a slower than expected roll out of the European Union’s recovery funds for the bloc’s coronavirus-battered economies.

Weaker than expected growth in the first quarter due to fresh restrictions imposed to tackle the third wave of COVID-19 infections also led the central bank to revise its 2021 growth forecast down to 6.0 percent from 6.8 percent predicted in December.

“The economic outlook remains subject to high uncertainty,” it said in a report outlining its latest macroeconomic projections for the Spanish economy, the eurozone’s fourth largest.

Spain’s economy contracted sharply by 11 percent in 2020, one of the worst performers in the eurozone, with its key tourism sector battered by the pandemic.

Spain and Italy, the EU’s hardest hit countries by the pandemic, will be the main beneficiaries of the bloc’s 750 billion euro rescue plan.

The country is due to receive 140 billion euros between 2021 and 2026 but the Bank of Spain said “part of the positive impact” of this plan will only be felt in 2022, and not this year as initially forecast, due to delays in the distribution of the funds.

Socialist Prime Minister Pedro Sanchez vowed in October to use the funds to create over 800,000 new jobs between 2021 and 2023.

Economic growth could reach 7.5 percent this year if the health crisis sparked by the pandemic improves thanks to vaccination of a large part of the population, the central bank said.

But it could be as little as 3.2 percent under the central’s bank’s more pessimistic scenario if the immunisation campaign is slower than expected and fresh waves of infections lead to new restrictions on economic activity.


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