Spain Economic Outlook. Second quarter 2020

Summary

The Spanish economy has entered into recession as a result of the extraordinary measures put in place to stop the spread of the Covid-19 pandemic. This crisis, however, is expected to be temporary. The activity is expected to grow again from the second half of the year.

Key points

• Key points:
• The global recession is inevitable as a result of the containment measures implemented to stop the spread of the coronavirus. This is a global shock with pronounced negative effects and high uncertainty.
• In Spain, GDP could fall by around 8.0% in 2020 and the unemployment rate could exceed the 20%, although the uncertainty is particularly high, especially in relation to the duration of the restrictions imposed and their differentiated impact by sector. There are many scenarios still possible under reasonable assumptions.
• Despite the fact that GDP growth could reach 5.7% in 2021, the level of activity observed before the crisis is not expected to recover until 2022. The impact of the government-led measures will help mitigate the fall in GDP by 3.5 percentage points. The speed of recovery will be constrained by the high job destruction and the exposure to particularly affected sectors.
• The bias on these forecasts is downward, given the uncertainty about the duration of the containment and its impact on activity.
• There is a need for a broad consensus to take measures to help overcome the health emergency as soon as possible, protect the productive fabric and minimise the economic impact, particularly on the most vulnerable groups.

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