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Summary

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Key points

• Key points:
• The drop ¤ in GDP per working-age population as a result of COVID-19 was historically unparalleled. Between the last quarter of 2019 and the second quarter of 2020, the contraction in it reached 25.5%. The strong recovery of the Spanish economy in the third quarter of the year, together with the stability of the last quarter, has allowed the drop between the last quarter of 2019 and the last quarter of 2020 to be only 9.9 points. However, according to estimates, GDP per working-age population in the first quarter of 2021 would have contracted again, standing approximately 10.9% below that of the end of 2019 (8.4% in the case of GDP).
• During the first two quarters of the COVID-19 crisis, i.e., in the harshest part of the confinement, supply factors explained 53% of the fall in GDP per WAP, while demand factors accounted for the remaining 47%. However, the year-on-year falls in GDP per WAP in the second half of 2020 are mainly explained by supply factors (86%), leaving very little room (only 14%) for demand factors. It is the supply factors that are entirely behind the expected contraction in the first quarter of 2021, as a positive contribution of close to 2 points is expected from demand factors.
• Among the supply factors, it is total factor productivity (TFP) that explains the fall in output to the greatest extent (with an average contribution of 6.6 points during 2020 and a negative contribution of 3 points also expected for the beginning of 2021).
• Among the shocks to credit and aggregate demand, it is worth highlighting the positive contribution of credit during 2020, contributing 0.8 pp to growth and with expectations that it will have continued to contribute another 0.4 pp in the first quarter of 2021. On the other hand, shocks capturing the public sector's aggregate demand impulse (public consumption and investment and indirect taxation) have also shown a positive contribution to growth in 2020 reaching 0.3 pp on average. However, this positive contribution seems to be fading at the beginning of 2021

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