Date Published: 02/07/2020
ARCHIVED - The Spanish economy declined by 5.2% in the first quarter due to the coronavirus crisis
ARCHIVED ARTICLE
The INE confirms an unprecedented drop since the statistical analysis began half a century ago
The National Statistics Institute (INE) confirmed on Tuesday that the Spanish economy slumped by an unprecedented 5.2% in the first quarter of the year compared to the previous quarter as a result of the Covid-19, an unprecedented drop since the current system of statistical analysis began half a century ago.
Spain’s Gross Domestic Product (GDP) which is the indicator most used to give an indication of the health and wealth of the economy, fell by 5.2% in the first three months of 2020. The largest drop previously recorded occurred in the first quarter of 2009 (-2.6%) at a time when Spain was first entering the economic recession.
It had been expected that these figures would be disappointing, as the bank of Spain had warned that GDP would probably fall by 4.7% in the first quarter, although for the first two and a half months Spain was effectively functioning as normal as the covid lockdown didn´t begin until the 14th March.
The Bank of Spain has estimated that Spain’s GDP could fall between 6.6% and 13.6% this year, depending on how the business sector recovers following the Covid lockdown and whether repeated outbreaks continue to result in the need for additional lockdowns in some areas.
The INE said in an accompanying press statement that every effort had been made to ensure that the effect of the lockdown was accurately reflected and had combined other indicators to ensure that the data accurately represented the fall in activity during the first two weeks of lockdown.
An example of this was the use of credit cards; BBVA say that use of cards fell to half its normal level during the first two weeks of lockdown, reflecting the decline of 5.1% in consumption and 7.5% fall in household spending.
During March retail trade fell by 15%.
Another indicator of the slowdown in business activity came with the EPA active workforce survey which reflects the number of people actively engaged in work rather than the unemployment figures produced by the state employment offices which show the number of people registered with their dependencies and actively seeking work.
The EPA showed that the number of those in employment fell by 285,600 people between January and March, which is the largest drop recorded by the EPA since the period when the recession was gaining pace and starting to register very high levels of unemployment in 2012.
The BBVA says:
• Global recession is inevitable as a result of the containment measures implemented to stop the spread of the coronavirus. This is a global shock with pronounced negative effects and high uncertainty.
• In Spain, GDP could fall by around 8.0% in 2020 and the unemployment rate could exceed the 20%, although the uncertainty is particularly high, especially in relation to the duration of the restrictions imposed and their differentiated impact by sector. There are many scenarios still possible under reasonable assumptions.
• Despite the fact that GDP growth could reach 5.7% in 2021, the level of activity observed before the crisis is not expected to recover until 2022. The impact of the government-led measures will help mitigate the fall in GDP by 3.5 percentage points. The speed of recovery will be constrained by the high job destruction and the exposure to particularly affected sectors.
• The bias on these forecasts is downward, given the uncertainty about the duration of the containment and its impact on activity.
• There is a need for a broad consensus to take measures to help overcome the health emergency as soon as possible, protect the productive fabric and minimise the economic impact, particularly on the most vulnerable groups.
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