Spain: Economy back in recession
May 17, 2012
In the first quarter, GDP contracted 0.3% over the previous quarter in seasonally adjusted terms, according to more complete data released by the National Statistics Office (INE) on 17 May, which confirmed the advance estimate published on 30 April. The reading mirrored the 0.3% decline recorded in the fourth quarter and marks a return to recession for the Spanish economy, following two consecutive quarters of contracting GDP. Unlike in previous quarters, the decline in Q1 was mainly driven by a sharp deterioration in the external sector, as domestic demand improved somewhat over the final quarter of 2011. Private consumption added 0.1% over the previous period, which marked an improvement compared to the 1.0% quarter-on-quarter contraction recorded in the fourth quarter. Moreover, gross fixed investment eased the pace of contraction (Q4 2011: -4.3% qoq; Q1 2012: -2.6% qoq). On the external side of the economy, exports contracted 0.9% over the previous quarter, a small improvement over the 1.6% decline recorded in the final quarter of 2011. Imports, however, recovered further, contracting only 0.6% (Q4 2011: -7.7% qoq) therefore driving down the external sector's net contribution to overall growth. On an annual basis, GDP declined 0.4% over the same quarter last year, which contrasted the 0.3% expansion recorded in the fourth quarter. The Central Bank projects the economy to contract 1.5% this year and to expand only 0.2% in 2013. The government expects the economy to contract 1.7% this year and to expand 0.2% next year.