Spain´s fourth quarter GDP confirms contraction

Date: Monday 30 Jan 2012

Spain´s Gross Domestic Product (GDP) for the fourth quarter of 2011 contracted by -0.3% quarter-on-quarter compared to a flat third quarter according to the latest data from the country's national statistics office (INE).

The reading was in line with the consensus estimate and with the recent estimate provided by the Bank of Spain.

Year-on-year the growth rate was 0.3% in the fourth quarter, compared to 0.8% in the previous quarter.

The press release explains that "global activity growth decreased by five tenths of a percentage point as compared with the previous quarter. This fact was due to the negative contribution from domestic demand, partly compensated by the positive contribution of foreign demand which grew when compared with the previous quarter. Real growth in GDP for the whole of the year 2011 was estimated at 0.7%."

Opinion:

As expected, this data shows that the Spanish economy has begun to contract, confirming the Bank of Spain's estimates made in its latest monthly bulletin. The Spanish economy has been slowing down in recent quarters and it appears that a recession will be confirmed. By definition, an economy is said to be in recession if it sees two consecutive quarters of negative quarterly growth.

The Spanish economy remains immersed in a deep economic crisis that has not yet reached bottom. Given the lack of internal demand, it is the external sector which is saving the Spanish economy. The outlook for private consumption is weak due to high unemployment and significant deleveraging. Fiscal austerity could further damage the situation in the short-term but is necessary for medium and long-term finance.

Francisco Miñana

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