The Spanish economy experienced higher than expected growth in the third quarter at 16.7%. The fastest expansion on record.
The Spanish Economy Minister, Nadia Calvino stated that “In the third quarter, our economy was able to reactivate and generate a large volume of jobs. That dynamic of job creation and workers exiting from furlough has maintained in October,”.
The positive news is a welcome change from the negative headlines that have hit the newstands since the pandemic triggered an unprecedented 18% drop in economic output in the second quarter due to the COVID-19 induced nationwide lockdown.
However, it is too early to celebrate. The Spanish economy – much like many of the Eurozone economies – was struggling prior to the pandemic and now finds itself on life-support.
Much of the growth wss internally driven with manufacturing industry (33%), investment (16.3%) and household consumption (20.7%) lleading the sectors of growth.
However the tourism industry – which accounts for nearly 12% of the country’s GDP had its worst summer since records began as the country´s Spain´s biggest tourist markets of the UK, France and mouch of northern Europe imposed quarantine measures for visitors which resulted in a 70’% fall in visitor arrivals compared with the same period last year.
The Government´s National Statistics Institute (INE) predicts an overall 11.2% contraction this year with hopes for a 7.2% rebound in 2021. This rebound is heavily dependent on the 140 billion Euro stimulus from the European Union which will require action from the European Central Bank.
The real question now is how the government will handle the second wave of the pandemic. A careful balancing act will be required between reducing hospital admissions and keeping the economy moving.
With unemployment currently around 16% and hospital admissions increasing the country faces a difficult winter.
Salvador Illa, Spain’s Heath Minister, ruled out new confinement orders stating that: ‘’we are waiting to see how the new measures like the curfews are impacting on infection rates’’. He went on to reiterate that the national government is ‘not considering’ home lockdowns in the coming weeks.
The efficacy of recent measures will be critical in determining how the country deals with the dual threat of economic stagnation and increasing infection rates. Currently, infections are increasing rapidly with a 66% increase over the last 15 days.
The total number of confirmed cases in Spain to date is 1.3 million of whom over 36,000 have died.