Mitch Rose Blog sets the facts straight on COVID-19, and why it’s really bad for the Spanish economy

As we enter March 2020, I’m pretty sure everyone has heard about the novel coronavirus, COVID-19, that’s taking the world by storm (literally and figuratively). At the time of this writing, there were over 93,500 COVID-19 cases in 81 countries. That’s a lot of cases and a lot of countries, and it will continue to spread: a top virus expert at Harvard predicts it could affect anywhere from 40-70% of the world’s population.

Now that we got the bad news out of the way, let’s get to the good. The current mortality rate of COVID-19 is 3.42%, and it drops to just 0.2% in people aged 39 and under. In other words, if you’re healthy and you get COVID-19, you’ll probably be fine, and you’re in even better shape if you’re under 39. What’s more, 80% of COVID-19 cases are mild with symptoms of the common cold and/or flu, and some people that get COVID-19 don’t even know they have it.

While there’s a lot of misinformation spread regarding COVID-19 that makes it seem worse than it is, there are reasons that it’s a big deal. The virus spreads very easily, currently has no vaccine, and you can have it for about two weeks and not even know. In fact, the low death rate may be the most dangerous part about COVID-19: in Layman’s terms, the virus wants to stick around and spread to more people so it can survive. In other words, it “prefers” not to kill you in order to affect more people. Wild.

So now that we have our COVID-19 facts straight, what does this have to do with Spain?

A lot, actually. COVID-19 could be a dagger in a Spanish economy that’s already struggling. According to the following graph from Statista, tourism is a larger portion of the Spanish economy, or a bigger part of its GDP, than any other country in the world (I apologize that the graph is in Spanish; I borrowed it from one of the classes I’m taking in Spain).

As you can see, more than 10% of Spain’s economy is derived from tourism, which is already declining and will continue to decline as world travel is further restricted with the inevitable spread of COVID-19. For example, Barcelona is contracted to host Mobile World Congress (MWC), a global technology conference, until 2023, and 2020’s conference was canceled due to COVID-19. The result: an estimated 500-million euros ($540 million) that won’t end up in Spain’s economy, and nearly 2,500 jobs lost in Barcelona alone (plus another 1,500 jobs lost in Spain’s service sector). The Forbes article I link to above also highlights a company called Autocars Esteve S.L., who says it makes 30% of annual sales during the week of MWC.

What makes this situation even worse is that Spain’s unemployment rate is already the second-highest in the European Union at roughly 13.7%, which is partly attributed to the seasonality of its jobs (more people travel in the Spring/Summer when it’s warmer, and agriculture is also a major part of Spain’s economy: again, warm weather). As global travel decreases, so too will Spain’s earnings from its tourism and service sectors, further debilitating its economy. Internationally, the Global Business Travel Association warned in late February that COVID-19 could cost the travel industry a staggering $560 billion in revenue.

In my business and economics classes here in Spain, my professors have asked us whether we know any international Spanish brands. While there are some global Spanish brands (Inditex, Iberia, BBVA, Santander, and Telefónica, to name a few), it’s a trick question in a way, because the answer they were looking for is: “well, there aren’t really any.” Why?

You could say that Spain is a very new country economically. It had to reinvent itself at the turn of the 20th century after it lost the last of its colonies (Cuba, Puerto Rico, the Philippines) in various battles with the United States. Then, in between the First and Second World Wars and at the end of the Great Depression, Spain had its own civil war. After the Spanish Civil War (1936-1939), Fransisco Franco assumed his position as dictator of Spain until his death in 1975. For the first 20 of his 35 years as ruler of Spain, the economy was self-sufficient, meaning Spanish companies couldn’t export, and there were no imports of foreign products. As a result, Spain was shut off from the global economy until 1959, during which the Spanish currency devalued drastically and the rest of the world increased its trade. So, Spain had to play catch-up when it finally opened up its economy in 1959.

Because there are few international Spanish companies, by nature, there are also fewer large businesses in Spain. For example, there are over 1.8 million businesses operated by one person, over 900,000 with 1-2 other employees, and over 300,000 with 3-5 other employees. By contrast, there are only 119 Spanish companies with over 5,000 employees. As a result, it can be hard to find jobs in Spain, which is why many college-educated people leave the country to find work and why nearly 14% of the population simply doesn’t have a job.

So while there are plenty of COVID-19 memes out there, it’s no joke for Spain. Let’s hope the myriad of drug and vaccine trials finish and find success quickly so that the virus can be contained, because I don’t want to leave Spain yet either.