A week of economic hibernation

A week of economic hibernation

Last Sunday’s decree manages to reduce mobility, but it is difficult to calculate its impact
All confined. Today is a week since the Government reinforced the stoppage of all non-essential activities . It did so by means of a royal decree, which arrived at night, almost at midnight from Sunday to Monday and established a one-day margin for its compliance, with a formula that had not yet been used since the origin of the health crisis. All employed persons – the self-employed were left out – who had not stopped until last Monday have since been on recoverable paid leave. That is, they have a kind of forced vacation and then they must return those hours to the company for the rest of the year. The permit applies until the next 9th, counting that the next day is a national holiday (Good Friday) and then the weekend arrives. In total, two weeks of maximum hibernation of the economy to try to bend the curve of the epidemic.

The decree came with numerous exceptions ( 25 incorporated in an annex ) that include essential activities, but also those that were already teleworking or some activities, such as the steel industry, where it is not possible to stop production due to the costs it would have. Industry and construction are the sectors to which the new standard appealed most directly, whose singularities make it difficult to calculate its cost. Estimates, which must always be taken with great caution, indicate that in the first two weeks of confinement after the declaration of the state of alarm on March 14, 40% of activity was lost. The week that ends and the next, with the strengthening of the measures of economic paralysis, the fall will be 60%. That would cost around four percentage points of GDP in a month, about 49,000 million euros .

It is easier to approach other figures to calculate the magnitude of the slowdown in activity, such as electrical demand, a classic meter in strikes. From last Monday to Friday, the peninsular demand was 2,902 gigawatt hours, 8.4% less than in the previous week and 19.1% less than in early March, according to REE data collected by Servimedia. In addition, the fall intensified as the week progressed, which shows a progressive stoppage of some activities. On Monday, within the 24-hour period that the Government gave to sectors that could not stop suddenly, the decrease was 4.9% compared to the same day the previous week. On Thursday and Friday it was around 10%.

economic hibernation b

When Pedro Sánchez announced the decision on Saturday 28, he pointed out that the objective was to reduce mobility , and therefore contacts between people, to approximate the figures for weekends. The goal, if the displacement data offered by the Executive himself is observed, has been half achieved. Private vehicle traffic has dropped 84% this week compared to a normal day. It does not reach the figures, above 90% on Saturdays and Sundays, but it is almost ten points more than the 75% drop that was registered last week. In other words, more people move than a weekend, but much less than before the decree.

That is one of the few clear things that exist among so many doubts. One of the ones that can be evaluated after some time is the damage to production and employment. Unions complain that many pre-employment or precarious work and service workers have been laid off in lieu of paid leave.

Nor is it yet known what will happen on Monday, April 13, the date when in theory everything should return to normal before March 29, although everything indicates that the state of alarm will last until April 26, although the limits could be raised of some activities like heavy industry. The main uncertainty, the extent of the coronavirus pandemic and its health scope, will remain pending.
Short circuit arrive construction
One of the sectors to which the hibernation decree of last Sunday was addressed was that of construction, which maintained a good part of the activity, despite protests by the unions about security problems against the virus. The decree that obliges to stop all non-essential activity affects almost 1.8 million monthly jobs in the sector, 500,000 of them indirect, according to calculations by Seopan, the employers’ association of large construction companies and infrastructure concessionaires. The decree managed to stop 89% of the works , all those that are neither urgent nor of general interest.

The Basque Country borders the industrial com

The paralysis of activity is almost total in the largest industrial estate in the Basque Country, in Álava, and in a large part of the Basque industry after the decree on Sunday that paralyzed all non-essential activity. But the authorized easing two days later breathes life into many companies. The Basque industry, clearly exporting, holds its breath so that on April 14 the restrictions are over and they can return to normalcy.

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