Spanish non-financial corporations’ liquidity needs and solvency after the COVID-19 shock

• Blanco, Roberto ^[1] ; Mayordomo, Sergio ^[1] ; Menéndez Pujadas, Álvaro ^[1] ; Mulino, Maristela ^[1]
  1. [1] Banco de España
• Localización: Documentos ocasionales - Banco de España, ISSN 1696-2222, Nº. 20, 2020, págs. 1-29
• Idioma: inglés
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• Resumen

  • The COVID-19 pandemic is exerting an unprecedented adverse impact on economic activity and, in particular, on firms’ income. In some cases this means firms’ income is insufficient to meet payments to which they have committed. This article presents the results of an exercise simulating Spanish non-financial corporations’ liquidity needs for the four quarters of this year. The needs derive both from the possible shortfalls caused by developments in operating activity and from investments in fixed assets and payments associated with debt repayment. According to the results, these liquidity needs, between April and December, might exceed €230 billion. It is estimated that, through the public guarantee programmes for lending to firms, almost three-quarters of this shortfall might be covered. To finance the remainder, companies could use their liquidity buffers and/or resort to new unsecured debt. In this respect, it should be borne in mind that, in recent months, firms with better access to credit have managed to raise a high volume of funds without resorting to public guarantees. Further, despite the unprecedented fall in business turnover, a significant percentage of companies (around 40%) is estimated to have been able to withstand this situation without posting a liquidity shortfall or undergoing a downturn in their financial position. However, at the remaining companies, the fall-off in activity has led to significant increases in their level of financial vulnerability, doing so more sharply within the SME segment and especially among the firms in the sectors most affected by the pandemic, such as tourism and leisure, motor vehicles, and transport and storage.