Spanish economy continues to suffer as slump drags on

INDEBTED Spain was lingering in recession in the fourth quarter, preliminary data from the Spanish National Institute of Statistics (INE) showed yesterday.

The INE figures showed that the Spanish economy contracted 0.1 per cent in the fourth quarter of 2009 compared with -0.3 per cent in the previous three months. This indicates that output contracted a real 3.6 per cent last year.

The statistics office said that the slowdown in the pace of contraction was due to “a less negative contribution of domestic demand and a positive contribution of the foreign sector”. Government stimulus measures have helped reduce the decline in domestic demand and the further upturn in
global trade has probably helped the export balance.

Final data will be released next week on 17 February.

ING’s Martin van Vliet said he still expects Spain to creep out of recession in the first half of this year.

“But the Spanish economy faces a long slog back to health. The growth assumption for 2010 underlying the latest budgetary projections seems plausible, but the numbers for 2011-2013 (average annual real GDP growth of around 2.5 per cent) are overly optimistic in our view,” he added.

Spain has come under pressure over the past week as the problems in Greece have intensified and concerns of contagion have risen. The Iberian country has a high unemployment rate and a budget deficit of 11 per cent, putting it at risk.