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Spain's GDP contracts slightly in Q1, dragged by COVID measures

Spanish GDP shrank 0.5% in Q1, dragged by COVID measures
Spanish GDP shrank 0.5% in Q1, dragged by COVID measures   -   Copyright  (c) Copyright Thomson Reuters 2021. Click For Restrictions -
By Reuters

MADRID (Reuters) -Spain’s economy shrank slightly in the first quarter from the previous three months, preliminary data showed on Friday, as restrictions to curb a third wave of coronavirus and a massive January snowstorm stifled output.

The euro zone’s fourth largest economy contracted 0.5%, the National Statistics Institute (INE) said, in line with a forecast of economists polled by Reuters and after a reading of 0% growth in the previous quarter.

As infections surged in the wake of the Christmas holidays, authorities tightened restrictions on movement and limited business opening hours, weighing on output and denting early optimism for a quick recovery from 2020’s record 10.8% slump.

Output fell across all sectors in the first quarter, the INE data showed, with construction the worst performer and consumption and investment also slipping.

Despite an overall decline in the services sector, hospitality, transport and trade grew by 1.4%, reflecting the lifting of some measures in March when Spaniards returned to bars and restaurants in droves.

On an annual basis, output slipped 4.3% from the first quarter of 2020 when the effects of the pandemic began to bite.

Around half a million jobs have been destroyed over the same period, and the number of unemployed has swollen by over 340,000.

The government recently cut its growth forecast for 2021 to 6.5% to reflect the anaemic first quarter and delays to the arrival of European Union recovery funds, even if the Bank of Spain expects a rebound in the second quarter.

(Reporting by Anita Kobylinska, Belén Carreño and Nathan AllenWriting by Nathan AllenEditing by Ingrid Melander)