Spain, Lagging Behind In The OECD And A Straggler In The Eurozone

The coronavirus has had a much harder impact on Spain than on other countries

According to the latest data published by the OECD for the month of August, Spain has become the club’s laggard economy. The OECD’s Advanced Composite Indicator registered a timid advance of three tenths to 98.3 points during this month. The trend suggests that developed countries will come closer to long-term average growth in the coming months. Spain, however, is at the back of the bunch, with 93.2 points. It is the only country which has slowed down, losing 1.4 whole points in August and becoming the country signalling lower growth. At the end of last year, the economic slowdown was already brewing, but the recession caused by the coronavirus has had a much harder impact on Spain than on other countries. The same indicator puts Germany at 99.4 points; the UK at 99.3; Canada and Japan both at 98.9; the US and Italy at 97.6; and France at 97.3.

The analysts at Link Securities believe this factor “to a great extent is what reflects the worst relative performance of the Spanish stock market in recent months.”

The final Q2’20 GDP data for the Eurozone does not leave Spain in a good position either. The decline in the country’s economic activity stands out as being the most negative, with a drop of 22.1%, ahead of France, which declined by 18.9%, Italy by 17.7% and Portugal by 16.3%. Ireland’s positive performance (+3.7% p/a) stands out , along with Germany which fell 11.3%, the smallest drop of the large European economies.

At a global level, the region’s data is slightly better than the preliminary figure, at -14.7% year-on-year versus the preliminary and expected -15%. The most negative contribution comes from private consumption, with an annual fall of 15.9% and a negative contribution to GDP of 6.6 percentage points. Gross fixed capital formation contracts 17.0% (contribution of -3.8 percentage points). Public expenditure falls by 2.5% (-0.6 percentage points). The foreign sector also shows a negative evolution with a drop in exports of 21.5% per year and in imports of 20.7%, with a net contribution of -1 percentage point.

With regard to employment in Q2’20, the number of people employed in the Eurozone fell by 2.9% compared to Q1’20, the biggest quarterly fall since statistics were first elaborated (1995). Once again, Spain heads the statistics table with a drop in the number of employed of 7.5%, followed by Ireland with a decline of 6.1% and Estonia with a fall of 5.1%. In contrast, Malta (+0.6%) was the only euro country to increase employment in the quarter.

After a very difficult Q2’20, Bankinter’s analysis team expects a gradual recovery in the coming quarters and a clear turnaround in 2021.

“The support of a very accommodating monetary policy for an extended period, the prospect of fiscal stimuli, especially the European Recovery Fund in 2021 and positive news in terms of health advances against Covid-19 in the coming months sustain the outlook for an economic recovery.”