Date Published: 23/09/2020
ARCHIVED - Spanish economy enters recession: drop of 17.8% in GDP in second quarter due to Covid-19
ARCHIVED ARTICLE
This is the largest quarterly fall recorded since records began in 1970 and is on an unprecedented scale
The National Institute of Statistics (INE) has revised GDP data for Spain during the second quarter of 2020 by seven tenths, the corrected figure now being a fall of 17.8% between April and June, the largest quarterly fall in the historical series that began in 1970. The final decline was seven tenths higher than the figure estimated at the end of July, when the agency estimated that the Spanish economy had fallen by 18.5%.
In year-on-year comparison, the GDP collapse is 21.5%, compared to the fall of 4.1% in the previous quarter, and represents an almost five-fold increase compared to the second largest in this method of recording data, which first started in 1970. The second largest drop occurred at the start of the previous economic crisis, as the property sector collapsed and unemployment started to grow rapidly, when gross domestic product fell 4.4% year-on-year in the second quarter of 2009, so the difference in the scale of what is occurring at this moment is unprecedented.
This historic fall, which intensified compared to the 5.2% contraction in the first quarter of the year, was the consequence of the collapse of household consumption (-20.4%), of business investment in capital goods (-28.6 %) and exports (-33.4%), while public administration spending increased 0.3%.
The INE explains that when it first calculated the data almost two months ago, most of the indicators on economic evolution provided results only until May, so the rest of the information was obtained from sources other than those usually used and estimates of indicators based on administrative data, as recommended by Eurostat.
The evolution of GDP between April and June is the consequence of a negative contribution of national demand (consumption and investment) of 16.1 points and of external demand (exports and imports) of 1.7 points.
The only economic sector that remained positive in the second quarter was agriculture, which grew 3.6% quarterly, while industry fell by 19.1%; services, 18.3%; and construction, 21.9%.
Within services, only financial and insurance activities advanced, 0.9%, while commerce, transport and hospitality registered the greatest contraction, 39.6%.
In contrast, consumer spending by public administrations grew by 0.3%, one point less than the previous quarter, and non-profit institutions, by 0.2%, after two quarters of declines.
In a context of the paralysis of activity and the closure of borders, exports (33.4%) and imports (29.5%) also fell.
The INE highlights in its report that the hours worked were reduced in this period by 21.7% compared to the first quarter of the year. In interannual terms, hours worked decreased by 24.9% and full-time equivalent positions decreased by 18.4%, which represented a decrease of 3,383 thousand jobs. This magnitude "reflects more clearly the effects induced on employment by the Covid-19 outbreak and the successive measures adopted," the agency comments in its report.
Spain entered recession in the second quarter
Now it has been confirmed that the Spanish economy collapsed by 17.8% between April and June, a period that coincides almost entirely with the validity of the state of alarm to tackle the coronavirus pandemic, Spain enters a technical recession after accumulating two consecutive negative quarters.