Spain in recession as GDP tumbles by 18.5pc
Madrid-Spain plunged into recession in the second quarter after its gross domestic product tumbled by 18.5 per cent due to the coronavirus pandemic, official figures showed on Friday.
In the first quarter, growth had fallen by 5.2 per cent, 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 per cent 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 per cent drop compared with the first quarter. And tourism, a pillar of the Spanish economy which accounts for 12 per cent of GDP, suffered with a 60 per cent drop in revenues compared the same period in 2019. Construction fell by 24 per cent compared with the first quarter and industry by 18.5 per cent.
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Household consumption dropped by around 21 per cent and business investment by 22 per cent while exports fell by around a third. The Spanish government sees the economy contracting by 9.2 per cent overall in 2020 but the Bank of Spain says that figure could reach 15 per cent. Analysts at Capital Economics said they were expecting the Spanish economy to contract “by some 12 per cent this year and then recover only slowly thereafter, with a return to pre-virus size years away”. “The record plunge in Spain’s GDP of 18.5 per cent is likely to have been one of the biggest falls of any euro-zone country in the second quarter, illustrating the severity of the country’s lockdown and its slow and partial recovery,” it said in a note. “And the recent rise in virus cases is likely to hold back the recovery in tourism, strengthening our view that the Spanish economy will struggle to rebound as quickly as its neighbours.”
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Article source: https://nation.com.pk/01-Aug-2020/spain-in-recession-as-gdp-tumbles-by-18-5pc