Spain enters steep recession, wiping out six years of growth

On an annual basis, Spain's economy shrank by 22.1 per cent, versus a 4.1 per cent contraction in the previous quarter.
On an annual basis, Spain's economy shrank by 22.1 per cent, versus a 4.1 per cent contraction in the previous quarter.PHOTO: AFP

MADRID (REUTERS) - Spain recorded a historic fall in GDP in the second quarter of the year, with the 18.5 per cent drop wiping out all the post-financial crisis recovery of the past six years, data from National Statistics Institute showed on Friday (July 31).

The contraction, triggered by one of Europe's strictest coronavirus lockdowns, was worse than the 16.6 per cent expected by analysts. It came after a 5.2 per cent drop in the first quarter, dragging Spain into its steepest recession ever, at a record pace.

On an annual basis, the economy shrank by 22.1 per cent, versus a 4.1 per cent contraction in the previous quarter.

Private spending was the factor that most dragged the economy down, along with investment and falling exports.

Spain had been growing for 24 quarters in a row until the first quarter, and was beginning to fully recover from the 2008 financial crisis.

The government has forecast a contraction of 9.2 per cent in 2020, surpassing the fall during Spain's 2008-2013 financial crisis, and has said it expects 6.8 per cent growth in 2021.

With tourism hard hit by a UK quarantine and travel advisories, the third quarter, which was expected to mark the start of an economic rebound, will be weaker than expected, said Raymond Torres, chief economist of think tank Funcas.

Spain depends on tourism for 12.3 per cent of its economic output.