Spanish non-financial corporations’ liquidity needs and solvency after the COVID-19 shock
Series: Occasional Papers. 2020.
Author: Roberto Blanco, Sergio Mayordomo, Álvaro Menéndez and Maristela Mulino.
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Abstract
The COVID-19 pandemic is exerting an unprecedented adverse impact on economic activity
and, in particular, on firms’ income. In some cases this means firms’ income is insufficient
to meet payments to which they have committed. This article presents the results of an
exercise simulating Spanish non-financial corporations’ liquidity needs for the four quarters
of this year. The needs derive both from the possible shortfalls caused by developments in
operating activity, and from investments in fixed assets and debt repayments. According to
the results, these liquidity needs, between April and December, might exceed €230 billion.
It is estimated that, through the public guarantee programmes for lending to firms, almost
three-quarters of this shortfall might be covered. To finance the remainder, companies
could use their liquidity buffers and/or resort to new debt without public guarantee. In this
respect, it should be borne in mind that, in recent months, firms with better access to
credit have managed to raise a high volume of funds without resorting to public guarantees.
Further, despite the unprecedented fall in business turnover, it is estimated that a significant
percentage of companies (more than 40%) would be able to withstand this situation without
undergoing a deterioration in their financial position. However, at the remaining companies,
the fall-off in activity would have led to significant increases in their level of financial
vulnerability, more sharply within the SME segment and especially among the firms in the
sectors most affected by the pandemic, such as tourism and leisure, motor vehicles, and
transport and storage.