The French and Spanish economies fell at the fastest rate ever recorded in the first quarter, as measures to contain the coronavirus pandemic froze business and household activity more severely than most analysts had expected.
France’s gross domestic product fell 5.8% in the first quarter compared with the previous quarter, according to preliminary estimates by the National Statistics Office (Insee), the largest decline since records started in 1949.
At the same time, Spain’s gross domestic production fell 5.2% over the same period, according to initial estimates from its Office for National Statistics (INE). This is the largest drop since the series started in 1995.
Analysts on average expected a quarterly drop in French and Spanish GDP of 4%.
With most European governments only starting to lock households and businesses in March, the region’s economy is expected to fall further in the second quarter.
The pandemic is expected to trigger the worst recession in the world economy since the Great Depression of the 1930s, and the magnitude of the slowdown was highlighted by the announcement on Tuesday of a 4.8% contraction in the first quarter of the economy American.
Germany predicted this week that its economy would contract by 6.3% year-on-year, before rebounding next year. New data on Thursday showed that German retail sales had fallen at the fastest pace in more than a decade despite strong growth in online and food purchases, while the number of airline passengers at German airports had dropped 63% in March.
The gloomy economic news should add to the pressure on the European Central Bank to intensify its measures to protect the eurozone economy from the full force of the pandemic when it announces its latest monetary policy decision Thursday afternoon. midday.
ECB President Christine Lagarde warned European leaders last week that eurozone GDP could drop 15% this year. Economists polled by Reuters predict a 3.5% drop in GDP in the first quarter from quarter to quarter in the 19 member countries.
The decline in the French economy is due to an “unprecedented” contraction of 6.1% in household consumption and an 11.8% drop in investment, said INSEE. “The negative development of GDP in the first quarter of 2020 is mainly linked to the cessation of” non-essential “activities in the context of the implementation of the lock-up since mid-March,” he added.
Florian Hense, economist at Berenberg, said that the contraction of the French economy in the first quarter had wiped out four years of growth, adding that “the country’s tighter government measures should better contain the Covid-19 pandemic, but that they also hit economic activity harder. “.
Earlier this week, Edouard Philippe, Prime Minister of France, announced his intention to reopen part of the economy from May 11 to avoid the risk of economic collapse.
Jessica Hinds, European economist at Capital Economics, said: “Overall, today’s data has implied a staggering impact on the French economy since the foreclosure, which will take a long time to recover, even with a substantial monetary and fiscal support. “
Hinds said this was particularly worrisome for the second quarter, as full restrictions would be in place for almost half of the current quarter, up from just two of 13 weeks in the first quarter, then being phased out.
France, the second largest economy in the euro area, contracted 0.1% in the last quarter of 2019, which means that the French economy has now entered a recession – defined as two consecutive quarters of negative growth. The drop in French production in the first quarter is greater than the 1.6% drop recorded in the first quarter of 2009 during the global financial crisis.
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In Spain, the record economic contraction in the first quarter ends more than six years of uninterrupted growth, most of which was well above the pace of the euro area average. The previous most significant quarterly decline in the Spanish economy took place during the financial crisis when it fell 2.6% in early 2009.
Spain announced plans to lift heavy restrictions on the company in May. But as a larger proportion of its economy depends on tourism, which has been hit hard, the country’s economy would be more exposed to the Covid-19 pandemic.