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By Nathan Allen and Belén Carreño

MADRID (Reuters) – Spain’s economic recovery accelerated in the third quarter, prompting a leading international organization and the Bank of Spain to improve their forecasts on Tuesday as the Spanish government considered a return to levels of pre-pandemic activity by the end of 2021.

One of the countries hardest hit by the first wave of the pandemic in 2020, Spain’s GDP collapsed a historic 10.8%, but the Organization for Economic Co-operation and Development (OECD) said Tuesday that it is expected to be the group’s fourth-fastest growing economy in 2021, expanding 6.8%.

The Bank of Spain also slightly raised its growth forecast for 2021, to 6.3%, although it said uncertainties over the pandemic remained.

The central bank said it did not expect activity to return to pre-pandemic levels until 2022, dampening optimism from the Spanish government, which is betting heavily on the stimulus effect of funds from relaunch of the European Union.

Speaking at a press conference, Economy Minister Nadia Calvino maintained the government’s economic growth targets of 6.5% for 2021 and 7% for 2022.

Private consumption and the release of household savings built up during the months of confinement and restrictions on social activities will be the catalyst for this economic recovery, agreed the OECD and the Bank of Spain.

Calvino said the Spaniards were sitting on up to € 50 billion in savings which could be unlocked in the coming months.

Despite the inflationary pressure of a meteoric rise in electricity prices, analysts believe the effect will be transitory and exclude second-round effects for now.

Calvino stuck to his previous forecast of unemployment falling to 15.2% by the end of 2021 from 15.3% reported in the second quarter, but still significantly higher than the 13.8% seen in the fourth quarter. from 2019.

Strong domestic demand and looser COVID-19 restrictions during the summer as well as a partial recovery in the tourism industry, including the return of significant numbers of foreign tourists, have contributed to a more optimistic outlook.

(Reporting by Inti Landauro and Belen Carreno; Editing by Nathan Allen, Angus MacSwan and Andrea Ricci)

Copyright 2021 Thomson Reuters.