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Spain GDP Q4 2020

Spain: Second release revises down estimates and reveals recovery stalled in Q4

A second GDP estimate revealed that the recovery stalled in the final quarter of 2020, amid the reimposition of restrictions to curb a second wave of Covid-19 infections. According to the revised reading, GDP remained unchanged on a seasonally-adjusted quarter-on-quarter basis in Q4, down from the initial estimate of a 0.4% s.a. qoq increase and markedly below the 17.1% surge logged in Q3. Moreover, output was still down 8.9% in year-on-year terms (preliminary reading: -9.1% yoy; Q3 2020: -8.6% yoy). For the year as a whole, the economy shrank a sizable 10.8% (previous estimate: -11.0%), nearly tripling the contraction logged during the 2009 global financial crisis and marking the sharpest collapse since the civil war in the 1930s (2019: +2.0%).

Easing domestic and external demand were behind the fourth quarter’s flatline. Consumer spending was unchanged on a quarterly basis in Q4, significantly below the 21.4% jump logged in Q3, as renewed restrictions and an ailing labor market restrained household purchases. Moreover, fixed investment growth cooled to 1.0% quarter-on-quarter as residential investment retreated and renewed containment measures led to a scaling back in business activity (Q3: +21.5% s.a. qoq). Meanwhile, government spending kept pace, growing 1.3% from the prior quarter (Q3: +1.3% s.a. qoq).

The external sector also experienced a setback in Q4. Growth in exports of goods and services moderated to 4.6% (Q3: +31.1% s.a. qoq) as the reintroduction of containment measures across Europe, triggered by rising infections, sapped demand, while the vital tourism industry continued to suffer. Imports, meanwhile, were up 6.2% in quarterly terms (Q3: +26.8% s.a. qoq). Taken together, net trade weighed on the headline reading, after making a positive contribution in the prior quarter.

Moving forward to this year, the economy should recover some of 2020’s losses, benefiting from unleashed consumer spending, incoming EU funds and reviving external demand amid easing restrictions. However, a slow vaccine rollout, a likely subdued summer tourism season, high public debt and uncertainty over government policy reforms—especially in the labor and rental markets—cloud the outlook.

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