Technically, it has now begun. Spain has officially entered recession, after GDP collapsed by 18.5% in the second quarter of the year, according to data released today by the National Statistical Institute (INE). This economic catastrophe, caused mainly by the cessation of activity to curb the coronavirus pandemic, has meant the most drastic collapse of the Spanish economy in a single quarter since at least the Civil War of the 1930s. INE data begin in 1970, and there is no drop of anything like this magnitude in the entire historical series.
This fall in GDP is on top of that already registered in the previous quarter, from January to March, when it fell by 5.2%. Together, in the first half of the year Spain has lost almost a quarter of its entire domestic economic output due to the pandemic (22.7%) - a percentage that equates to about 300 billion euros.
Quarterly variations in GDP in Spain, 1970-2020 Q2
All indicators are falling
In this second quarter, most indicators are looking horrific. Domestic consumption has dropped by 21.2%, unprecedented in the statistical record.
Investment plummeted by a similar percentage - a drop of 22.3% in the second quarter, with falls of around 25% or more in the case of investments in housing and in machinery and equipment.
Public spending increased by 0.4% between April and June, much less than it did in the first quarter (1.8%), while spending by non-profit institutions serving houeholds (such as charities and churches) rose 0.5%, three tenths less than in the previous quarter.
Employment, at rock bottom
Employment is frequently one of the variables most affected in times of economic crisis. In this situation, the number of hours actually worked is key, since, as the INE points out, "it is considered that this variable, compared to full-time equivalent jobs, is the one that most clearly reflects the effects induced in employment by the pandemic and the measures taken to combat its effects".
Thus, employment in terms of hours worked fell in the second quarter by 21.4% over the previous quarter. In year-on-year terms, hours worked decreased by 24.8%, a rate 20.6 points lower than in the first quarter. The number of full-time equivalent positions fell by 18.5%, that is, 17.9 points less than in the first quarter, which equates to the loss of almost 3.4 million full-time jobs in a year.
Recession
After two consecutive quarters of falls, Spain thus meets the technical definition of a recession, which in practice has already been visible for months. This is the third time in the 21st century that the Spanish economy has fallen into recession: during the financial crisis starting in 2008 it fell into this status twice, the first time in the fourth quarter of 2008 and the second during the subsequent "Euro crisis", in the second quarter of 2011.
It is salutary to note that the Spanish fall is much greater than that of other European economies. Germany, for example, fell 10.1% in the second quarter, according to data released a few hours ago. In the case of France, the reduction is 13.8%. This difference in the Spanish situation is that the lockdown was harsher while the structure of Spain's economy is much more centred on services, a sector more sensitive to lockdown and the drastic mobility restrictions.