Publications

In recent months, financing conditions for non-financial corporations and households have remained very favourable, while demand for credit has lost momentum. In this setting, the flow of new financing raised by these two institutional sectors and their outstanding debt have slowed down. Indeed, the volume of loans granted by deposit institutions to the resident private sector has declined slightly between June and September 2021, with no significant changes in credit quality over the quarter. The sectors of activity most affected by the health crisis have not shown any notable changes in 2021 Q3 in terms of volume and credit quality, although they continue to post the highest cumulative growth in bank debt, non-performing loans and Stage 2 loans since the start of the pandemic. The rise in the volume of credit since the onset of the heath crisis has helped to sustain banks’ interest income, but has failed to offset the negative price effects of the widespread decline in interest rates.

This article describes the economic and financial performance of Spanish non-financial corporations in 2020, a year marked by the impact of COVID-19. According to the information available in the Central Balance Sheet Data Office integrated database, the crisis severely affected activity, causing a sharp decline in turnover and profitability, albeit with very uneven effects across sectors. There was also a deterioration of many firms’ financial position, caused by both rising debt and, to a larger extent, falling revenue. Firms were able to meet the greater liquidity needs without any widespread strains. In fact, easier access to external financing allowed firms, on average, to increase their liquidity buffers as a precautionary measure. More recent developments are also analysed on the basis of Central Balance Sheet Data Office Quarterly Survey (CBQ) data for the first three quarters of 2021. This period has seen a gradual improvement in firms’ economic and financial position that has partially reversed last year’s deterioration, in line with the economic recovery. The article includes two boxes. The first analyses the impact of the COVID-19 crisis on average supplier payment and customer collection periods. The second analyses recent developments in activity drawing on other statistical sources with a more extensive or representative coverage of the corporate sector than the CBQ.

Global inflation rates have increased since early 2021, especially in the United States, where there has been an upward surprise in recent months. Part of the US inflation increase is due to a statistical phenomenon stemming from the comparison of current and previous-year prices, which were marked by an across-the-board decline in activity. Further, the economic recovery has prompted a rise in prices in the sectors most affected by the pandemic, it has accentuated certain supply and logistics disruptions, and it has been accompanied by an increase in the price of the energy component. While these factors are considered to be transitory, three upside risks to prices may be identified: first, wage pressures arising from the labour supply and demand mismatch; second, a greater-than-expected inflationary effect of the fiscal stimulus introduced in response to the pandemic; and third, a possible de-anchoring of medium-term inflation expectations. In any event, these transitory effects are expected to feed through relatively moderately to euro area inflation.

The information for the sample of firms reporting to the Central Balance Sheet Data Office Quarterly Survey (CBQ) evidences that in 2021 H1 firms’ activity clearly recovered, partly reversing the sharp contraction in 2020. Thus, between January and June 2021, ordinary profit posted significant increases, although without recovering its pre-pandemic levels. Employment also rebounded, driven by the rise in permanent hires and a smaller decline in temporary employment. Against this background, average profitability levels rose significantly, albeit remaining below the values recorded before the pandemic. The financial position indicators showed an increase in firms’ indebtedness across the sample in 2021 H1, leading to slightly higher average debt ratios, while the debt burden ratio resumed a downward path, assisted by the decline in the cost of outstanding debt and the increase in ordinary profit. Average liquidity ratios declined in most firms and sectors, following the sharp rise in the previous year. This article includes a box which analyses recent developments in trade finance granted and received by firms, concluding that the median for the average supplier payment and customer collection periods held steady in 2021 H1, slightly below pre-pandemic levels, after the increase observed in mid-2020. This may indicate that firms now have a more comfortable liquidity position, in a setting in which economic activity is gradually picking up.

Citizens’ well-being depends both on their income levels and on the cost of living in their specific place of residence. However, very limited data are available on differences in price levels across geographical areas within a single country. This article presents a price index for Spanish urban areas covering the period 2004-2020. By way of example, according to this index, the cost of living in the two largest cities (Madrid and Barcelona) in 2020 was nearly 20% higher than the average of other Spanish urban areas. Thus, while average private sector wages in Madrid and Barcelona were 45% higher than in other cities, this gap narrows to 21% when wages are adjusted to reflect purchasing power.

Financing conditions for households and firms remained accommodating in the first half of 2021. Improved macroeconomic expectations from the second quarter of the year have allowed credit standards to cease tightening, at the same time as demand for loans has picked up, particularly among households. This has contributed to an increase in the flow of loans as compared with end-2020, especially loans for house purchase. However, up to May (latest available figure) this growth in new financing has not translated into an acceleration of total outstanding household and corporate debt. In the sectors hardest hit by the pandemic, total outstanding bank lending to firms and sole proprietors grew moderately in the initial months of 2021. However, the cumulative growth since the onset of the pandemic has been sizeable as a result of the hefty liquidity needs in 2020, which were covered through increased debt. The significant adverse impact of the COVID-19 pandemic on economic activity is yet to be reflected in a broad-based increase in non-performing loans on deposit institutions’ balance sheets. However, Stage 2 credit remained on a rising trajectory in 2021 Q1, with loans to the hardest-hit sectors of economic activity accounting for the lion’s share. Non-performing loans also grew in these sectors, albeit by a lesser amount.

In the year since the onset of the pandemic caused by COVID-19, the International Monetary Fund (IMF or the Fund) has granted loans and emergency financing to over 85 countries, an unprecedented number. In the past, a shock on this scale would have brought the issue of the sufficiency of its resources centre-stage. However, on this occasion, given the characteristics of the loans granted, the IMF’s general resources have not been excessively squeezed. Pressure has been greater on the concessional resources granted to low-income countries. Against this background, the IMF’s general and concessional resources have two different needs to contend with. In the case of the former, the IMF has the leeway to respond to any future increase in the demand for ordinary financing and, if necessary, it could activate its temporary resources. Conversely, in the case of the latter, it must ensure there are sufficient resources to avert stiffer concessional financing terms for the most vulnerable countries, in what is the most complicated economic juncture of recent decades. The IMF should obtain new borrowed resources as these countries progressively replace emergency assistance with conditional financing.

The COVID-19 pandemic has had a major impact on the recent performance of the Spanish commercial real estate market. In particular, the crisis has led to a sharp decrease in non-residential investment and has triggered a correction in sale prices, transaction numbers and new financing operations. It has also affected Spanish real estate investment trusts specialising in this market, both in terms of the number of vehicles created and of their stock prices and the value of their real estate assets. By contrast, to date there has been no significant deterioration in credit quality linked to the commercial real estate market.

Consumers’ expectations of economic developments are a fundamental determinant of their spending decisions. This article estimates, using simple expectation formation rules in the context of a general equilibrium model, the degree of persistence that households assign to the economic impact of the pandemic. The findings show that households have perceived that the COVID-19 shock has a lower degree of persistence than other previous negative shocks. According to the model used, this would signal an uptick in private consumption, once the health crisis is over, that would tend to offset the decline observed during the pandemic.

One of the main determinants of the level of dynamism of business investment is the efficacy of the legal system, as an essential element of the institutional framework of an economy. This article sets out an empirical approach to the impact of the efficacy of justice on the investment decisions of a sample of Spanish firms. Drawing on the cross-provincial heterogeneity in the court congestion rate, and how it changes over time, this analysis suggests there is a positive and significant correlation between efficacy in the civil justice system and business investment in Spain.

The information for the sample of firms reporting to the Central Balance Sheet Data Office Quarterly Survey evidences that in the first three months of 2021 firms’ activity continued to contract compared with 2020 Q1. However, it did so at a far slower pace than a year earlier, when the first effects of the COVID-19 crisis made themselves felt. Thus, from January to March 2021 there were further reductions, albeit minor, in gross value added and gross operating profit, while employment continued to fall across the sample as a whole. Nonetheless, lower depreciation and operating provisions allowed ordinary net profit to rise and, consequently, profitability indicators to recover slightly. The financial position indicators have, on average, shown a far more subdued performance than in 2020, with slight increases in the average debt ratios and stability in the share of profits used to pay interest. Also evident is a slight decline in average liquidity ratios, following the strong increase in the previous year. In any event, these aggregate developments in the firms’ economic and financial indicators were compatible with strong heterogeneity both at the sectoral level and in other dimensions. The article includes a box which analyses recent developments in the firms’ liquidity ratios, concluding that some of the firms that had increased their liquidity buffers as a precautionary measure in 2020 appear to have lowered this ratio in 2021 Q1, in step with the gradual dissipation of uncertainty over future macroeconomic developments.

The Financial Accounts of the Spanish Economy show that in 2020 the developments in balance sheets and financial transactions were strongly influenced by the health, social and economic crisis and by the extraordinary economic (monetary, fiscal and financial) policy measures adopted to mitigate its effects. Against this background, unlike the previous three years, households reduced their debt in the form of bank loans, essentially owing to the sharp slowdown in consumer credit. However, given the more pronounced contraction in household income, their aggregate debt/gross disposable income (GDI) ratio rose by 2.1 percentage points (pp) to 94.8%, breaking the downward trend of the previous years. The debt-to-GDP ratio of non-financial corporations also increased (by 12.3 pp to 85%), which is explained not only by the decline in GDP but also by the considerable growth in new financing, primarily in the form of bank loans. A further relevant aspect in 2020 was the substantial rise in holdings of liquid assets by firms and households since firms built up precautionary liquidity buffers and households sharply increased their saving.

The serious economic impact deriving from the COVID-19 pandemic on already ailing low-income countries has prompted the search for support instruments among the international financial community. The official debt moratorium agreed by the G20 for these countries in the spring of 2020 has brought a modest temporary relief to their public finances. However, the agreements reached among official creditors could facilitate consensus on farther-reaching initiatives for the resolution of debt problems in the international sphere. In this connection, the fact that an agreement has been reached by the G20 on a “common framework for debt treatments” is an important precedent for coordination among official creditors. This article puts the debt-relief measures agreed and the challenges associated with their application into context. Their implementation and effectiveness will depend on the degree of coordination achieved in practice by creditor countries.

In 2020, the Spanish economy recorded net lending of 1.1% of GDP, significantly below the previous year’s level of 2.5%. This decline essentially reflects the impact of the health crisis on travel credits, which contracted sharply, owing to the restrictions on international mobility and on activity in accommodation and food and travel services to contain the pandemic. The widening of the secondary income deficit also contributed to the decline in net lending, albeit to a much lesser extent. These developments offset the improvement in the other components, which was particularly notable in the goods and primary income balances. Cross-border financial transactions were strongly influenced by the increase in the volume of Eurosystem asset purchases, as reflected by a large surplus on the financial account of resident sectors, excluding the Banco de España. By contrast, the financial transactions of the Banco de España with the rest of the world showed a large increase in its liabilities. Spain’s negative net international investment position increased to 84.3% of GDP, essentially as a result of the sharp fall in GDP and the decline in the value of external financial assets owing to the appreciation of the euro. Finally, in terms of GDP, the nation’s gross external debt stood at all-time highs (199.4%) owing to the contraction in economic activity and the assumption of new liabilities, in particular by the Banco de España, given the increase in its positions vis-à-vis the Eurosystem as a result of the implementation of the asset purchase programmes.

The residential real estate market has been affected by the COVID-19 pandemic, which broke out at a time when the cycle of this market was in a mature phase. Activity fell off sharply in the early months of the health crisis, owing to the effect of the restrictions adopted. It has since seen a slow recovery and remains highly influenced by epidemiological developments and the related impact on agents’ economic outlook. The pandemic has triggered manifest changes in the type of housing in demand, attributable to households’ new needs arising from the lockdown and increased remote working. As compared with other crises, prices are showing greater downward rigidity, particularly in the case of new housing, although the impact of the pandemic is proving highly uneven across regions. The pandemic-induced economic crisis has not driven up the cost of financing for house purchase which has continued to decline to record lows. Nevertheless, there are some signs of a tightening of credit standards and of some of the terms and conditions applied to loans.

The extraordinary fiscal policy response to mitigate the strong economic impact of the COVID-19 pandemic has pushed public debt notably higher, exceeding its peak levels of the last five decades in the main advanced economies. Additionally, support for the economic recovery will foreseeably require maintaining a sizeable fiscal impulse in the short term. In this setting, announcing medium-term plans to rebalance public finances would be suitable, according to the studies available. These plans recoup the countercyclical room for manoeuvre of fiscal policy, as well as anchor economic agents’ expectations and reduce the potential risks of high government indebtedness for future economic activity. This article describes the example of the United Kingdom, the first country to propose a gradual fiscal adjustment programme for the medium term, while maintaining public support for the economic recovery in the short term.

This article analyses the main trends in securities issuance activity on international markets in 2020, a year in which capital markets were very buoyant despite the COVID-19 crisis. In 2020, record figures were posted for issues on fixed-income markets globally, driven by the measures adopted by governments and central banks to smooth financing and foment market liquidity. In terms of sectors, issuance by the public sector and non-financial corporations increased, while there were declines in the banking sector. By region, increases in issuance volumes were across the board, with notably greater dynamism in the United States and the United Kingdom. Finally, as regards time horizon, there was a strong increase in the second quarter of the year, with record figures posted. This may have been due to the fact that many issuers attempted to bring forward their issues in that quarter given the enormous uncertainty over the course of the pandemic and future financing conditions. Equity market issues were also notably buoyant, with figures not recorded since 2009.

This article uses microdata from the Spanish Labour Force Survey (EPA) to conduct an initial analysis of the use of furlough schemes as a temporary employment adjustment mechanism in this crisis. The information drawn from the survey shows there has been an intensive use of furlough schemes since the COVID-19 crisis broke, with more than 20% of dependent employees furloughed in 2020 Q2. This is far higher than the incidence observed in previous recessions. Analysis of the employment transitions of furloughed workers shows that they were much more likely to resume employment in Q3 than workers who lost their jobs but were not furloughed. These schemes have, therefore, been highly effective in allowing workers to resume work once the lockdown measures adopted in spring 2020 were lifted. However, considering the furlough schemes that began in Q3 and those that were longer-lasting, there is less difference between furloughed and non-furloughed workers in terms of the probability of their resuming work. This essentially reflects the ongoing low level of activity associated with the continuation of the pandemic-related restrictions.

The COVID-19 crisis has significantly impacted firms’ economic and financial performance. Thus, the Central Balance Sheet Data Office Quarterly Survey evidences that in 2020 the ordinary earnings and average profitability of the firms of this sample fell sharply. While profitability worsened across the board, in some sectors, such as industry, wholesale and retail trade and hospitality, and information and communication, the deterioration was particularly severe. Further, extraordinary earnings performed particularly negatively, resulting in a sharp drop in net profit. Financial positions have also been dented; the average debt and debt burden ratios both increased. In light of greater uncertainty, firms increased their liquidity buffers as a precautionary measure. The article contains a box that concludes that the increased financial pressure borne by some firms seems to bear a greater relation to the drop in ordinary earnings than to the rise in debt, which, overall, appears to have been moderate for the sample firms.

On 20 December 2020 the European Union (EU) and the United Kingdom (UK) signed a Trade and Cooperation Agreement (TCA) setting the terms on which trade relations between both areas will be based. This article describes the essential points of the agreement, in both the trade and financial areas, and the governance framework that will regulate its fulfilment. It further analyses how the TCA will affect both areas’ GDP, and which adjustment measures are being taken to offset potential adverse effects.

This article analyses the cost of electricity for Spanish firms. This cost is compared with other expenditure by Spanish industrial firms on goods and services and with their turnover, distinguishing by firm size and sector. Generally, in the industrial sector, the ratio of electricity expenditure to spending on goods and services increases as firm size diminishes, while the ratio of electricity expenditure to turnover is much higher for micro enterprises than for others. By sector, cement, lime and plaster manufacturing posts the highest ratios, followed by several extractive industries, some intermediate goods-producing basic metal industries and the energy, water and waste group.
Regarding the price of electricity, the article examines, in particular, the importance of the regulated cost component – paid through what are known as access charges – for medium-sized and large electricity consumers by sector. Owing to the design of the access charges, the highest average prices correspond to the lowest consumption bands. The average access charge by supply voltage has been stable since the last tariff review in 2014. In real terms, access charges decreased in the period 2014 to 2019.

The COVID-19 health crisis had a highly uneven impact across sectors and regions in 2020. However, there is hitherto little evidence regarding the heterogeneous impact of the crisis on
different firms within each sector and region. This article provides an initial description of the characteristics determining how severely firms have been affected by the pandemic. To this end, it uses the responses (just over 4,000) given in the first round of the Banco de España Business Activity Survey (EBAE), launched in November 2020. The results show that turnover and employment declined more markedly at smaller-sized firms. Moreover, within each sector and region, the crisis has had more adverse effects on younger firms, less productive firms and those located in urban areas. In the case of jobs, higher temporary employment ratios are associated with larger reductions in employment.

This article presents an estimation of changes in provincial GDP over the course of 2020. The pandemic’s impact on activity has been highly uneven across Spain’s provinces, with the island provinces and those on the Mediterranean coast being the most affected. The factors that lie behind this disparity are also explored. The steepest declines in activity were associated with a greater weight of tourism – particularly inbound tourism – in provincial activity, a higher proportion of temporary employment, a lower weight for the public sector and lower levels of public mobility. However, after controlling for the effects related to mobility and economic structure, the excess mortality prompted by the pandemic does not appear to be a significant variable in explaining the cross-province differences in GDP change during 2020.

Financing conditions for households and businesses have remained accommodating in the second half of 2020, assisted by the support measures introduced by the economic and monetary authorities to contend with the fallout of the COVID-19 pandemic. However, there are signs of some tightening in credit standards, linked to financial institutions’ increased risk concerns. The recovery in economic activity since the summer has favoured a more dynamic flow of credit to individuals, while, after the large volume of financing granted to productive activities over the spring, new lending to this sector declined significantly. The strong negative impact of the COVID-19 pandemic on economic activity did not filter through in any significant way into the quality of deposit institutions’ private sector credit portfolio until 2020 Q3. Although the decline in non-performing loans observed in previous years generally slowed across portfolios in 2020, and despite the pick-up in specific portfolios, such as those relating to consumer credit, total non-performing loans have continued to decline on a year-on-year basis. Growth in the volume of public guarantees for lending to business eased in the second half of the year and the volume of credit subject to non-expired moratoria, which is concentrated mostly in banking association schemes, stabilised.