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  HOME | Business & Economy (Click here for more)

Coronavirus Lockdowns Send GDP Tumbling across Europe

MADRID – The Spanish economy plunged to a historic low during the first quarter of 2020 as the effects of the draconian lockdown and industrial paralysis began to bite while the European Union’s economic outlook for the year also painted a bleak picture.

Spain’s GDP fell 5.2 percent in the first three months of the year compared to the final quarter of 2019, according to the country’s statistics office (INE).

It represented the biggest drop since records began in 1970 and was far below the 2.9 percent contraction registered in the first quarter of 2009 in the midst of the global financial crisis.

Retail, hospitality and non-essential activities have been paralyzed since the Spanish government declared a state of alarm on 14 March in a bid to prevent the rapidly spreading coronavirus outbreak from overwhelming the healthcare system.

Advance data published by the INE shows a 4.1 percent fall in GDP compared to the first three months of 2019.

Household spending fell 7.5 percent, the largest drop on record, while investment fell 5.8 percent, the biggest decline since the second quarter of 2009.

Exports and imports both fell by 8.4 percent.

The Bank of Spain warned earlier this month that the country’s GDP was expected to decrease anywhere between 6.6 and 13.6 percent as a consequence of the lockdown, one of the strictest in the world.

Unemployment figures provided by the EU on Thursday added to the grim economic outlook facing the country as prime minister Pedro Sanchez’s government began to gradually wind back the lockdown.

Spain’s unemployment rate increased from 13.6 to 14.5 percent between February and March this year, more than any other country apart from Cyprus, which had the same percentage increase, according to the data.

Eurostat presented its data using the definition of an unemployed person provided by the International Labor Organization, which counts working age people actively looking for a job.

The definition leaves room for discrepancies in the context of the coronavirus, given many people are unable to work.

“The COVID-19 confinement measures introduced in March 2020 have triggered a sharp increase in the number of claims for unemployment benefits across the EU,” Eurostat added in its report.

The majority of Spain’s 47 million residents have been housebound for more than six weeks, and are only allowed to leave to buy food or medicine.

Adults are expected to be allowed outside to exercise from 2 May as part of the government’s four-stage lifting of the lockdown.

Spain’s daily death toll fell to 268 on Thursday, the lowest figure recorded since 20 March, according to the health ministry.

There had been a total of 24,543 fatalities since the outbreak began, and 231,435 confirmed cases, of which 112,050 have recovered.

All EU member states have enforced restrictions of some kind to deal with the coronavirus outbreak.

Collectively, the measures prompted a 3.5 percent fall in GDP across the EU and a 3.8 percent drop in the eurozone.

Christine Lagarde, the president of the European Central Bank on Thursday warned of an economic contraction between 5 and 12 percent in the eurozone this year.

It came as the ECB, which administers euro monetary policy, on Thursday said it would maintain current interest rates, boost its coronavirus stimulus package if needed and make lending easier for banks.

The ECB announced a 750-billion-euro ($813 billion) government debt purchasing scheme to keep borrowing costs down back in March.

In France, one of the worst-affected countries with over 24,000 fatalities, GDP fell by 5.8 percent in the first quarter of the year, levels not seen since 1949, according to its statistics office.

The French government earlier this week announced it will begin lifting the lockdown on 11 May.

Prime Minister Edouard Philippe warned that continued restrictions would risk collapsing the French economy.

The percentage of unemployed in France jumped from 7.9 percent to 8.4 percent between February and March.

And in Italy, the worst-hit European nation in the pandemic with more than 27,500 deaths and 203,000 confirmed cases, the GDP fell 4.7 percent in the first three months of the year.

The Italian government will start cautiously opening up its economy on 4 May after a period of almost total paralysis.

Germany’s government said on Wednesday its GDP would shrink 6.3 percent in 2020 with finance minister Peter Altmaier warning: “We will experience the worst recession in the history of the Federal Republic.”

Germany was able to measure its unemployment figures through its offer of reduced work days, employment minister Hubertus Heil said Thursday.

The percentage of unemployed people grew 0.9 percent from last year to 5.8 percent.

“For months we have been able to report on the success of our labor market,” Heil said.

“The situation has changed and the pandemic places us before a historic challenge.”

He said it was a “bitter” statistic, but one that could be worse without the existence of reduced work day schedules, known in Germany as Kurzarbeit.


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