Spanish Economy Slumps As Unemployment Looms

The Spanish Statistics Institute (INE) have released the figures for the second quarter of 2020 showing that the economy had contracted by 17.8% and is now in a recession.

The fall represents the largest single quarterly drop since records began and the worst performance  in the European Union.

The second quarter of April-June coincides with the majority of the period within the state of emergency timeline which included the strictest national lockdown in Europe.

Worse news is expected for employment figures as the government´s furlough scheme ( ERTE) is due to finish at the end of September.

The economy is heavily dependent on the sectors that were hardest hit by the restrictions, chiefly hospitality, transportation, entertainment, and above all tourism that represents some 12% of GDP.

The tourist sector has been particularly badly hit by first the second quarter lockdown and subsequently the collapse of the summer market due to the restrictions imposed by the UK and other European countries in July that show no signs of being lifted.

Although the economy is still expected to recover in 2021 the Bank of Spain released a downgraded forecast for 2020 of a contraction of between 10.5% and 12.6% with the economy rebounding by between 4.1% and 7.3% in 2021.

The forecast for 2022 allows for continued growth but the economy would still be between 6 and 2% smaller than its pre Covid position.

The labour market is expected to remain poor once the ERTE scheme comes to a close at the end of September with a rise in unemployment of between 19.4% and 22.1% for 2021 of the labour force.