Spain: Economy contracts amid depressed domestic demand
February 28, 2013
In the fourth quarter, GDP contracted 0.8% over the previous quarter in seasonally adjusted terms, according to more complete data released by the National Statistics Office (INE) on 28 February. The decline slightly exceeded the advance estimate of a 0.7% contraction published on 30 January and represented a deterioration compared to the 0.3% decline recorded in the third quarter. The figure marked, in fact, the largest contraction recorded in over three years.
The sharper contraction in Q4 was mainly caused by a deeper decline in private consumption, which contracted 1.9% over the previous period (Q3 2012: -0.5% quarter-on-quarter), the sharpest contraction since the first quarter of 2009. Government consumption fell 0.3% over the previous quarter (Q3: -2.5% qoq) as the government continues to implement a series of rigorous austerity policies. Meanwhile, gross fixed investment plunged 3.9% over the previous quarter, a further deterioration compared to the 1.3% decline observed in Q3.
On the external side of the economy, both exports and imports deteriorated over the previous quarter. Exports swung to a 0.9% contraction (Q3: +5.1% qoq), while imports plunged from a 2.7% expansion in Q3 to a 4.8% decrease.
On an annual basis, GDP declined 1.9% over the same quarter the previous year, a deterioration over the 1.6% decline recorded in the third quarter. In the full year 2012, GDP contracted 1.4%, which contrasted the 0.4% expansion recorded in 2011, as austerity continues to erode domestic demand.
According to its economic bulletin from February, the Central Banks expects GDP to continue to contract in the first quarter as a result of sluggish domestic demand. The government expects the economy to contract 0.5% this year.