(Adds comments from Bank of Spain governor)
MADRID, Dec 11 (Reuters) - Spain’s recovery from its worst-ever economic contraction likely halted in the last three months of this year because of new restrictions imposed to curb the resurgence of COVID-19, the Bank of Spain said in a report on Friday.
The central bank said the planned rollout of vaccines from January slightly improved next year’s outlook from its previous forecast released in September, but that it would take until at least 2022 for national output to reach pre-pandemic levels.
Speaking in the Senate, Bank of Spain Governor Pablo Hernandez de Cos also warned that the budgeted increase of some taxes next year could hinder fledgling recovery, potentially leading to lower tax revenues than projected by the government.
Its central projected scenario foresaw gross domestic product falling 0.8% in the fourth quarter from the previous three-month period. Its forecast ranged from a 3% contraction to a 0.6% expansion.
“The fourth quarter is worse than we expected in September,” Oscar Arce, the central bank’s chief economist, told reporters on Friday. “The intensity of the second (COVID-19) wave surprised us.”
However, the bank said Spain would perform better than most of the euro zone, for which an average contraction of 2.2% is expected in the fourth quarter.
“We have mixed signals, some indicators pointing to an acceleration and others to a fall,” Arce said.
The government still expects the economy to eke out some quarter-on-quarter growth, based mainly on recent jobs data.
The central bank projected an economic slump of between 10.7% and 11.6% this year, narrowing its forecast range from the 10.5% to 12.6% predicted in September.
It raised its forecast for next year to a growth of 4.2% to 8.6% from its previous range of 4.1% to 7.3%, thanks to the impact of EU recovery funds.
The central bank expects the aid to contribute an extra 1.3 percentage points to GDP growth in 2021, with its central scenario pointing to a 6.8% expansion next year. That is still a far cry from the 9.8% predicted by the government, which expects a stronger boost from the EU aid.
Spain has been one Europe’s hardest-hit countries by the pandemic, with over 1.7 million infections and 47,344 deaths. The second wave arrived at the end of the third quarter, bringing various restrictions, but no new nationwide lockdown across the country, which has a tourism-dependent economy. (Additional reporting by Inti Landauro and Nathan Allen; editing by Andrei Khalip and Jonathan Oatis)
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