According to the latest figures released by Spain’s National Institute of Statistics (INE), GDP in Spain has fallen by 5.2% in the first financial quarter of 2020. The drop in activity has been attributed to the Coronavirus pandemic which has resulted in a complete country-wide lockdown brought many businesses in Spain to their knees. The 5.2% decline is the largest quarterly drop in almost 100 years.
Furthermore, the Bank of Spain estimates that Gross Domestic Product, the main indicator used to measure a country’s productivity and wealth, could drop by between 6.6% and 13.6% in 2020 due to the coronavirus pandemic.
During the economic crisis of 2009, Spain’s GDP fell by 2.6% in the first quarter and in earlier this month the Bank of Spain estimated that the Coronavirus would wipe 4.7% off of Spain’s GDP. The situation began to look more concerning when the Instituto Nacional de Estadística (INE) published retail and active employment figures.
Retail trade fell by 15% in March and the latest employment figures showed that the number of people employed in Spain fell by almost 286,000 between January and March, the biggest drop in employment since the recession of 2012. Furthermore, the number of hours worked had fallen 4.25% in the first quarter, as employers took advantage of ERTE (“Expediente de Regulación Temporal de Empleo”), a temporary scheme set up by the Spanish Ministry of Employment which allows companies to issue temporary redundancy to their employees as a result of the force majeure. Over 560,000 people have been affected by reduced hours or have been temporarily laid off as a result.
Figures for the second quarter of 2020 are expected to be even worse as Spain eases out of the lockdown which has effectively closed the country since the middle of March. The government plan, which was announced on Tuesday, allows businesses throughout Spain to begin opening slowly. Tight resitrictions are still in place but will be loosened in a four step plan recently presented by Spain’s Prime Minister, Pedro Sánchez, to Congress. Each phase will take at least two weeks with phase zero having already begun.
Despite the measures taken by the government to ease Spain out of lockdown, however, there is still much uncertainty amoung the business community. The Bank of Spain has announced that GDP could see activity mirroring that of the 2008 to 2013 recession in Spain where GDP fell by almost 10%. It estimates a fall of anywhere between 6.6% and 13.6% for 2020.
The figures released by INE do not reflect the full impact of the econonomic slowdown caused by the Coronavirus pandemic. Many indicators included in the latest statistics do not take into account the slowdown in the economic activity experienced in March so some data is still missing.
Depsite that, there is a clear indication that the economy has been affected across most sectors whcih the hardest hit being recreation (11.2% fall), travel, tourism, and hotelry (10.9% fall), construction (8% fall), scientific and professional activities (8% fall), and information and communication (5.55 fall). Public administration, health and education saw a slight increase of 0.8% and activity was also favourable for financial and insurance activities which grew by around 1%.