Spain entered recession in the second quarter, with a collapse of Gross Domestic Product (GDP) of 18.5% compared to the previous one due to the coronavirus pandemic, according to data published Friday by the National Statistical Institute (INE).
After the 5.2% contraction in the first quarter, the fourth euro area economy has two consecutive months of falling GDP, a definition of a recession.
The Bank of Spain expected a contraction of between 16 and 22% of GDP in the second quarter, marked by strict confinement in April, accentuated by two weeks of closure of all non-essential activities.
Between May and June, the exit of confinement was very progressive.
The trade, transport and hospitality sector was hit hard, with a 40% drop from the previous quarter.
Construction fell 24%, and industry by 18.5%.
Tourism, one of the pillars of the Spanish economy, accounting for 12% of its GDP, was hit hard, with a 60% decline in its revenue from the same quarter of 2019.
Household consumption collapsed by 21% compared to the previous quarter, and business investments by 22%, while exports fell by more than a third compared to the January-March period.
The Spanish government expects a GDP contraction of 9.2% this year, although the more pessimistic Bank of Spain expects the fall to be 15%.
Spain has been one of the countries most affected in Europe by the pandemic, with more than 28,400 killed according to the official count.
But it will also be one of the main beneficiaries of the European revival plan agreed in Brussels by the European Union on 21 July last.
Thus, the country is expected to receive in the form of direct credits and subsidies a total of 140 billion euros ($166.245 million) of the total of 750 billion ($890.6 billion) of the European plan.
According to Economy Minister Nadia Calviño, measures taken by the government to support activity, including a temporary unemployment plan, state guarantees to corporate credits, or self-employed aid, have prevented “a GDP drop of more than 25%.”
The cost of these measures, he noted, represents “20% of GDP projected in 2020”.
The pandemic destroyed more than one million jobs in Spain in the second quarter, mainly in tourism and the service sector.
The unemployment rate rose to 15.3% at the end of June, and is expected to rise to 19% by the end of the year, according to the government. The IMF expects an unemployment rate of 20.8%.
