Spain: Second estimate revises up Q2 GDP reading but collapse remains unprecedented
September 23, 2020
A second GDP estimate released by the National Statistics Institute on 23 September showed that economic activity was decimated in the second quarter due to the Covid-19 outbreak and lockdown measures imposed to contain its spread. GDP plummeted 17.8% in quarter-on-quarter seasonally-adjusted terms in Q2, revised up from the 18.5% plunge reported in the preliminary release but nonetheless marking an unprecedented collapse (Q1: -5.2% qoqsa). In annual terms, economic activity shrank 21.5%, also slightly revised upwards from the 22.1% downturn recorded in the flash estimate (Q1: -4.2% yoy).
Both domestic and foreign demand were obliterated in the quarter. Household spending tanked a historic 20.4% on a quarterly basis (Q1: -6.8% qoqsa) as confinement measures shut down consumption. Moreover, fixed investment crashed 22.1% quarter-on-quarter on nosediving residential and machinery and equipment investment (Q1: -4.8% qoqsa). Meanwhile, public spending lost considerable stride, growing a meager 0.3% from the previous quarter (Q1: +1.3% qoqsa).
On the external front, data was also dire. Exports crumbled 33.4% on a quarterly basis (Q1: -7.4% qoqsa) as the vital tourism industry reeled amid widespread travel restrictions. Similarly, imports tumbled 29.5% quarter-on-quarter on depressed domestic demand (Q1: -5.8% qoqsa).
Commenting on what lies ahead for the economy, Alvise Lennkh and Giacomo Barisone, analysts at Scope Ratings, noted:
“Spain now faces a very gradual, sector-specific and highly uncertain recovery. However, the positive effect of the resumption of economic activity is somewhat offset by the advice of some governments not to travel to Spain this summer, which will result in important losses to the tourism sector. Balancing these effects, and mindful of the high uncertainty around the economic outlook, Scope expects for 2020 a moderate recovery in Q3 and Q4, resulting in an overall 2020 GDP decline of about 12.5%.”
Author: Javier Colato, Economist