The potential growth of the spanish economy after the pandemic

Despite the exogenous nature of the COVID-19 health crisis, its intensity and persistence could have a negative impact on long-term economic growth. This article offers a comprehensive discussion of the various channels through which this crisis could affect the potential growth of economies, as well as some scenarios for the Spanish economy over a medium-term horizon. Although the high degree of uncertainty in the current circumstances makes it advisable to interpret these estimates with caution, the results point to a potential growth rate for the Spanish economy very similar to that estimated before the pandemic, of around 1.3%. However, it should be noted that the economic policies adopted have been and will be critical in determining the long-term effects on the economy’s growth capacity. In particular, European funds can be catalysts for a significant boost to both investment and productivity in the long term. Such a boost would result in higher potential growth of the Spanish economy, especially if accompanied by structural reforms that favour synergies between public and private investment, maximising their impact on productivity. According to the estimates presented in this article, the potential growth of the Spanish economy could be in the vicinity of 2% under a scenario in which a good selection of investment projects financed with European funds is accompanied by growth-enhancing structural reforms.