THE ASYMMETRIC IMPACT OF THE PANDEMIC IN THE EU: THE ROLE OF NGEU FUNDS
Pablo Hernández de Cos
Governor
EUROPEAN INVESTMENT BANK
ANNUAL ECONOMIC CONFERENCE
PANEL SESSION III: ASYMMETRIC IMPACTS - ARE EUROPE'S ECONOMIES CONVERGING OR DIVERGING?
13th January 2022
THE PANDEMIC LED TO SIGNIFICANT ECONOMIC DIVERGENCES IN THE EUROPEAN UNION
THE NGEU PROGRAMME COULD MITIGATE THEM
ECONOMIC IMPACT OF THE COVID-19 PANDEMIC
PRODUCTIVE STRUCTURE | NGEU FUNDS |
PP | 8 | |
(FORECAST) | GDP2019(a) | 6 |
4 | ||
LEVELGDP2021 | RELATIVETO | 2 |
0 | ||
-2
-4
-6
-8
10
LU
EE | PP | 8 | ||||||||
LT | (FORECAST) | GDP2019(a) | 6 | |||||||
HU | RO | PL | 4 | |||||||
SI DK | ||||||||||
FI | SE | LV | 2 | |||||||
BE | CY | LEVELGDP2021 | TORELATIVE | |||||||
SK | HR | |||||||||
0 | ||||||||||
BG | ||||||||||
DE | FR | GR | ||||||||
CZ | AT | -2 | ||||||||
IT | MT | |||||||||
PT | ||||||||||
-4 | ||||||||||
ES | -6 | |||||||||
-8 | ||||||||||
15 | 20 | 25 | ||||||||
0 |
EE | |||||||||
LT | |||||||||
LU | |||||||||
RO | |||||||||
DK | PL | HU | |||||||
SI | |||||||||
SE | LV | ||||||||
FI | BE | CY | |||||||
HR | |||||||||
SK | |||||||||
DE | AT | FR | BG | GR | |||||
CZ | IT | ||||||||
MT | |||||||||
PT | |||||||||
ES | |||||||||
500 | 1.000 | 1.500 | 2.000 |
% GVA | MM € PER CAPITA | |
WEIGHT OF MOST VULNERABLE SECTORS 2019 (b) | ||
NGEU GRANTS |
Sources: Eurostat and European Commission
- 2021GDP forecast from European Commission 2021 Autumn forecasts.
- Calculated as the share of nominal GVA of the sectors accommodation and hospitality (I), artistic and leisure activities (R), and other personal services (S) in the whole economy.
2
NGEU FUNDS
AN UNPRECEDENTED MAGNITUDE. THE USE OF THE FUNDS IS A KEY DETERMINANT OF EXPECTED GROWTH
- NGEU represents an unprecedented source of funds, similar to the amount of structural funds Spain has received in the last three decades. Around 2% of GDP per year, over six years (if asked for in full)
COMPARISON BETWEEN NGEU AND STRUCTURAL | EFFECT OF NGEU SPENDING ON SPANISH GDP AS |
FUNDS IN SPAIN | 2021 DECEMBER BANCO DE ESPAÑA |
MACROECONOMIC PROJECTIONS |
Eur Millions constant prices 2018 | pp deviations from | |||||
200000 | benchmark | |||||
2,0 | ||||||
150000 | 1,5 | |||||
100000 | 1,0 | |||||
50000 | 0,5 | |||||
0 | 0,0 | |||||
STRUCTURAL FUNDS | ||||||
NGEU | 2022 | 2023 | 2024 | 2021-2024 | ||
2021 | ||||||
REACT-EU | RRF GRANTS | RRF LOANS | ||||
Source: European Commission | Source: Banco de España. December 2021 |
3
UNCERTAINTY ABOUT ITS IMPACT (I)
TOTAL ABSORPTION CAPACITY IS KEY. SHORT-RUN IMPACT DEPENDS ON AGILITY IN IMPLEMENTATION
USE OF EU FUNDS FROM A HISTORICAL PERSPECTIVE
AT THE END OF THE BUDGET HORIZON (a)
100%
75%
50%
25%
0%
GERMANY FRANCE ITALY SPAIN
Program 2000-2006 | Program 2007-2013 | Program 2014-2020 | ||
Source: European Commission.
- The absorption rate is the ratio of the total payments to total compromises accumulated until year seven of each program.
EFFECT OF NGEU SPENDING ON GDP IN SPAIN
BANCO DE ESPAÑA MACROECONOMIC PROJECTIONS
- deviations from benchmark
2,5
2,0
1,5
1,0
0,5
0,0
MARCH 2021 | JUNE 2021 | SEPTEMBER DECEMBER 2021 | |||||||
2021 | |||||||||
2021 | 2022 | 2023 | 2024 | ||||||
Source: Banco de España
4
UNCERTAINTY ABOUT ITS IMPACT (II)
FISCAL MULTIPLIERS ARE VERY HETEROGENEOUS. SECTORAL BOTTLENECKS & SPILLOVERS MAY AFFECT OVERALL AND COUNTRY-LEVEL IMPACTS
- Large uncertainty about the size of multiplier: fiscal multipliers may differ depending on use, composition, complementarity with private investment, additionality, etc.
- Sectoral focus might exacerbate bottlenecks in specific sectors and countries, also in the context of green and digital transition, leading to lower (higher) direct impact in some countries, depending on sectoral specialisation
REGIONAL FISCAL MULTIPLIERS OF EU FUNDS
10
8 | ||
6 | ||
4 | ||
2 | ||
1,4 | 1,1 | 0,3 |
0
-2
-4
-6
1 year | 2 years | 3 years | |||
25% | 75% | MEDIAN | |||
Source: Canova and Pappa (2021). GVA fiscal multipliers, computed on the basis of European Regional Development Funds (ERDF).
SPAIN - SUPPLIERS' ORIGIN OF CAPITAL
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Domestic | Imported | |
Source: EU-KLEMS
5
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Banco de España published this content on 13 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 January 2022 09:30:04 UTC.