By Belén Carreño and Inti Landauro
MADRID – The pace of Spain’s economic recovery from the coronavirus crisis in the second quarter was less than half the initial estimate, official data showed on Thursday, jeopardising upbeat full-year forecasts of a return to pre-pandemic output levels.
In an unprecedentedly sharp revision, the National Statistics Institute (INE) said the economy grew just 1.1% in the April-June period from the previous quarter, down from a flash estimate of 2.8% released in late July. It also revised the scale of the first-quarter contraction to 0.6% from 0.4%.
Until this revision, the Spanish economy had been recording one of the fastest rebounds among developed countries, after a historic 10.8% slump in 2020.
Just two days ago, the OECD ranked Spain as the fourth-fastest growing economy in the world this year and the Bank of Spain revised higher its full-year growth forecast for 2021 to 6.3%, describing the July estimate for second-quarter expansion as “a positive and big surprise”.
Economy Minister Nadia Calvino earlier this week announced an expected return to pre-pandemic GDP levels by the end of 2021..
With today’s data, such calculations will probably change.
The INE said its downward revision was prompted by final data on sales, from both large and small companies in the service and manufacturing industries, as well as private consumption.
It now believes the segments most exposed to consumption, such as retail, restaurants and transport, had shrunk 0.4%, while it had previously estimated 5.5% growth.
“It is a period of large and rapid changes… It poses an unprecedented statistical challenge,” the INE added.
The INE also revised year-on-year growth for the second quarter to 17.8% from 19.8%. In the same quarter of 2020, Spain was under a strict lockdown.
“The downward revision of GDP growth… will significantly delay the recovery of the Spanish economy after the COVID-19 crisis and implies a downward bias in our growth scenario for 2021″, said Rafael Domenech, chief economist at BBVA.
The Bank of Spain, asked if it would now review its outlook, said it would take the new data into account for future forecasts, adding the INE‘s July estimate had surprised on the upside.
Skyrocketing electricity prices are also pressuring Spanish household and business spending, the Funcas think-tank said, posing further challenges to Spain’s growth.