At the height of the Covid-19 pandemic in 2020, Spain experienced a year of two very different halves. In the opening six months, the economy was hit particularly hard, as severe lockdown measures brought activity to a standstill. But by the end of the second half of the year, the picture had started to improve. Government and household consumption picked up, supporting a 0.4% growth increase in the fourth quarter, contributing to a much-needed boost in fortunes for Spain’s private sector. Despite this late revival of fortunes, the economy as a whole shrank by 10.8% over the year, making it one of the sharpest contractions in continental Europe.
In response to these challenges, Spanish banks performed admirably. Not only did they adopt prudent macroeconomic assumptions in terms of their provisioning needs, but they also played an outsized role in supporting the economy through a national crisis.
