Spain registers the worst quarterly fall in GDP in its history

Spanish Gross Domestic Product falls by 18.5% in the second quarter of 2020
A man wears a protective mask when passing through the Bank of Spain

REUTERS/NACHO DOCE  -   A man wears a protective mask when passing through the Bank of Spain

Spain's Gross Domestic Product (GDP) fell sharply by 18.5% in the second quarter of 2020, according to the National Statistics Institute (INE). 

This is the biggest quarterly decline in the Spanish economy since records began. Something that shows the absolute slowdown produced between April and June as a result of the state of alarm established to address the health crisis of the COVID-19. An exceptional period that lasted from March 15 to June 21. At a year-on-year rate, the collapse reached 22.1%. Although the Ministry of the Economy has already reported that the government's economic measures have prevented a 25% fall in GDP.

Spain is already technically in recession as it has suffered two consecutive quarters of GDP decline. In the first (which included the consequences of the impact of the coronavirus in China, its spread through Europe and the financial turbulence, in addition to the first fifteen days of the state of alarm) economic activity contracted by 5.2%. Spain had enjoyed six consecutive years of growth before falling back into recession.

The reasons for the setback are to be found in the heavy dependence on services, especially those linked to tourism, the sector most severely affected by the closure of borders and confinement restrictions.

The INE issued an official statement in which it explained that "the impact of the restrictions imposed on the movement of persons and the exercise of economic activities for the protection of the health of the population since last March due to the extension of the COVID-19 pandemic, as well as the gradual lifting in different parts of the national territory of these measures throughout the quarter introduce an extraordinary difficulty for the measurement of recent economic evolution". It is very likely that the GDP figure will be corrected, although the data will continue to be devastating. 

There are telling indicators, such as the fact that household consumption fell by 21% over the quarter, probably as a result of the rising unemployment rate and reduced circulation due to the health crisis, and also the increase in household savings as a result of general uncertainty and fear. The same happened with business investment, which fell by 22% in the same period. Exports of goods and services, on the other hand, sank by 33.5%, due to the disappearance of tourism, with an impact also on the 40.4% decline in trade, transport and hotel activity. 

The Spanish GDP had already deeply felt the impact of the pandemic and had fallen by 5.2% in the first three months of 2020, which at the time was the largest quarterly fall compared to the historical data recorded by the National Statistics Institute (INE), a statistical series that began to be catalogued in 1970. Now negative historical records are again being overcome with the latest data on the national economy.