Spain: Covid-19 plunges economy into historic contraction in Q1 2020
The economy suffered its worst downturn in history in the first quarter, battered by the coronavirus pandemic and lockdown measures imposed to contain its spread. According to an advance GDP estimate released by the National Statistics Institute (INE) on 30 April, economic activity plunged a seasonally-adjusted 5.2% from the previous quarter in Q1, contrasting the 0.4% expansion logged in Q4 2019 and coming far below what market analysts had expected. In year-on-year terms, the economy shrank 4.1% in Q1, after it grew 1.8% in Q4 2019 and marking the worst reading since Q2 2009.
The collapse in activity reflected both plunging domestic and external demand. Consumer spending nosedived a historic 7.5% quarter-on-quarter (Q4 2019: +0.1% quarter-on-quarter) as the lockdown which came into effect in mid-March closed all non-essential stores and shut down consumption. Fixed investment suffered a similar fate, plummeting 5.8% (Q4 2019: -1.2% qoq) amid a collapse in construction spending and, to a lesser extent, machinery and equipment investment. Public spending, however, picked up markedly due to the government response to tackle the crisis, increasing the most in over 11 years (Q1: +1.8% qoq; Q4 2019: +0.7% qoq).
The external sector was also hammered. Exports of goods and services crashed 8.4% (Q4 2019: +0.6% qoq) as the spread of the pandemic shut down foreign demand, marking the steepest drop since the depths of the 2009 global financial crisis. Imports fared no different, shrinking 8.4% from the previous quarter on reeling domestic demand (Q4 2019: -0.8% qoq). Taken together, net trade subtracted from the headline reading, after making a sizeable contribution to growth in Q4 2019.
The economy is expected to contract this year amid the coronavirus crisis and associated containment measures. Household consumption will suffer amid significant job losses; capital spending will be hit amid deteriorated sentiment; and exports will diminish as the all-important tourism sector comes to a halt and global demand flags.
The INE will release the second GDP estimate on 30 June.