THE EURO ZONE
The newly-updated statistics for Spain's GDP performance in the second quarter of this year reveal that things weren't quite as bad as some thought. According to the National Statistics Institute, the country's economy contracted by 17.8% between April and June (i.e. during the nationwide lockdown), as opposed to the 18.5% the institute estimated back in July - a difference of just 0.7%. Is this a cause for optimism, continued gloom, or neither?
Coming after a 5.2% decline in the first quarter of 2020, the updated figure still means that Spain has technically entered recession - a term all-too-readily associated with the traumas of the "Great Recession" of 2007-2009 and, in Spain, of the period between 2008 and 2013. Equally technically, the Covid-induced recession will only end if Spain posts GDP growth (no matter how small) in the third quarter of this year, which we're just coming to the end of.
Tentative comparisons between the current situation and the global recession that started in 2007 have already started to appear in Spanish and international media, but they're premature. The theoretical definition of a recession is a downturn in economic activity that lasts for at least two consecutive quarters (or half a year), which could cover a very slight downturn in GDP that quickly returns to expansion, a dramatic yet brief contraction, or a grinding, long-term decline in output, productivity, consumption and employment such as that seen globally between 2007 and 2009, and in Spain between 2008 and 2013. Given the broad academic definition, then, there are numerous ways in which a country can be in recession.
The rate of Spain's GDP contraction during Q2 this year is alarming, not least because it hasn't hit such lows since the outbreak of civil war in the summer of 1936. But by itself, the decline of 17.8% doesn't necessarily signal the onset of the kind of recession seen a decade ago: depending on the statistics for the quarter now ending, and on how the Spanish economy performs throughout the final three months of 2020, the Covid-induced recession could prove to be intense but relatively short-lived.
So, how does the rest of 2020 look? Despite the optimism of economy minister Nadia Calviño, who said at the end of August that growth in the third quarter is likely to be 10%, the Bank of Spain doesn't see the economy returning to a pre-Covid state until 2023.
The government of Pedro Sánchez has stated that a huge injection of funds from the EU will help stave off a drawn-out period of economic stagnation, but that's entirely dependent on how it uses the money.
All of which means that it's still unclear just what kind of recession Spain entered back in April this year.