Gobernador. EIB Annual Economic Conference. "The asymetric impact of the pandemic in the EU: the role of the NGEU funds" (925 KB)

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

1. 2021GDP forecast from European Commission 2021 Autumn forecasts.
2. 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.

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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

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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.

1. 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

1. 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

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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

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