Spain sinks into recession in Q2

Agence France-Presse

Posted at Jul 31 2020 04:42 PM

MADRID - Spain plunged into recession in the second quarter after its gross domestic product tumbled by 18.5 percent due to the coronavirus pandemic, official figures showed on Friday. 

In the first quarter, growth had fallen by 5.2 percent, the Institute of National Statistics said (INE). A recession is commonly defined as two consecutive quarters of a contraction in GDP.

The first of estimate by INE is broadly in line with the forecast by the Bank of Spain which had seen a contraction in the economy of between 16 and 22 percent for the period between April to June at the height of the lockdown when all non-essential activities were halted. 

The restrictions imposed under the state of emergency, which began in mid-March, were only gradually lifted in May and June. 

The business, transport and hotels sector were all badly hit, with a 40 percent drop compared with the first quarter. 

And tourism, a pillar of the Spanish economy which accounts for 12 percent of GDP, suffered with a 60 percent drop in revenues compared the same period in 2019. 

Construction fell by 24 percent compared with the same period a year earlier, and industry by 18.5 percent. Household consumption dropped by around 21 percent and business investment by 22 percent while exports fell by around a third. 

The Spanish government sees the economy contracting by 9.2 percent overall in 2020 but the Bank of Spain says that figure could reach 15 percent. 

Spain suffered a particularly deadly outbreak of the virus, with more than 28,400 people losing their lives.

However, it will benefit considerably from the historic 750-billion-euro rescue plan that was agreed by the European Union's 27 member states on July 21. 

Under the plan, Spain will receive 140 billion euros ($162 billion) of which just over half -- or 73 billion -- is in the form of subsidies, while the rest is in the form of loans. 

According to Economy Minister Nadia Calvino, the measures taken by the government to prop up the economy -- such as extending its furlough scheme, state-sponsored loans, subsidies for the self-employed -- enabled Spain to avoid "a collapse in GDP of more than 25 percent".

© Agence France-Presse