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The BdE sees a fall in GDP of 21.8% in the second quarter, worse than in the euro area


The fall in the Spanish Gross Domestic Product (GDP) would have "sharply intensified" in the second quarter, reaching 21.8%, making the recession scenario the worst in the euro area, according to the latest report. Banco de España economic bulletin published this Thursday.

In the first quarter, GDP fell 5.2% quarter-on-quarter, dragged down by the collapse of private national demand in the last fortnight of March, as a consequence of the restrictions associated with the state of alarm, and also due to the effects of analogous measures taken in the rest of the world. But for the period between April and June, the scenario looks worse and the Bank of Spain foresees a "notable intensification of the decline in GDP".

This is explained by the fact that the period between the beginning of the confinement and the beginning of the de-escalation covers seven weeks, of which only the first two correspond to the first quarter, and the rest to the second. In addition, most of the period of suspension of non-essential activities, in which the fall in output was more pronounced, also took place in the second quarter. And, finally, the de-escalation period has also been associated with production losses with respect to their usual level, which, although decreasing, have remained until the end of the quarter.

Furthermore, it would be a "greater" decrease in Spain compared to the euro area as a whole, "due to the greater severity of the measures applied and the greater weight of the activities most exposed to social interaction in the sectoral structure of our country". However, the agency warns that the paralysis situation causing the collapse began to reverse with the beginning of the de-escalation in the past and it already observes clear indicators of reactivation, although at a lower rate than the period before the pandemic.

Even so, the scenarios considered in the most recent macroeconomic projections of the Bank of Spain differ among themselves, among other aspects, in estimating the fall in GDP. In an early recovery scenario, GDP would drop by 16%, while in a gradual recovery scenario, the drop would reach 21.8%.

For the whole of 2020, the GDP would fall, respectively, 9% and 11.6% on the average for the year in the scenarios of early and gradual recovery. These two scenarios are complemented by a third, in which the recovery would take place at a very slow pace and the decrease in GDP would amount to 15.1%. "Only in the early recovery scenario, the level of GDP at the end of 2022 would exceed the pre-crisis level, which underlines the possibility that the consequences of the crisis will have a lasting component," they highlight.


The agency also notes that, in the period from the entry into force of the state of alarm (March 15) to the start of the de-escalation process (May 4), it is estimated that economic activity in Spain would have decreased around 30% with respect to its level in the absence of a pandemic. In addition, during the validity of the suspension of non-essential activities, between March 30 and April 9, the reduction in production would have been around 50%.

"The decrease in activity during the period of confinement would have been greater in Spain compared to the euro area as a whole, due to the greater severity of the measures applied and the greater weight of the activities most exposed to social interaction in the sector structure of our country ", they explain.


From the point of view of employment, he points out that, after the sharp falls accumulated since mid-March, "employment would have begun to show a certain stabilization in May" due to the de-escalation itself. The Social Security affiliation showed an advance of almost 190,000 people in May compared to the end of April, being better in those more advanced provinces in the de-escalation.

It also occurred in the ERTE, where at the end of May there were almost 3 million workers or 21.3% of the employees affected by an ERTE, “which implies a decrease of 11.5% compared to the figures referring to the last day. working day of April ”, he refers.

However, the Bank of Spain warns that the unemployment rate "will experience a significant increase in the second quarter", since registered unemployment grew by 23.2% in the average of April and May. "This increase suggests that the unemployment rate, which in the first quarter was 14.4% of the active population, according to the EPA, could approach 20% in the second," he estimates, noting further that, under certain conditions, ERTE workers are not considered unemployed by maintaining a relationship with their company.

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