Spain GDP Contracts, Putting Economy on Edge
Spain’s gross domestic product contracted in the fourth quarter, pushing the economy toward its second recession since 2009 and undermining the government’s efforts to reorder public finances.
GDP (SPNAGDPQ) contracted 0.3 percent in the last three months of the year and rose 0.3 percent from a year earlier, the National Statistics Institute said in an e-mailed statement today in Madrid. The figures match the estimate published on Jan. 23 by the Bank of Spain.
The People’s Party government, in power since December, is trying to convince investors it can reduce the budget deficit by almost half this year even as the recession weighs on revenue and employment. The economy may shrink 1.5 percent, pushing the jobless rate to 23.4 percent if the government meets its austerity goals “strictly,” the Bank of Spain said last week.
With the highest jobless rate in the European Union and credit shrinking by the most on record, Spain’s economy will probably slump for the next two years, contracting 1.7 percent in 2012 and another 0.3 percent in 2013, according to the International Monetary Fund. That will make it impossible to reach the deficit targets of 4.4 percent of GDP this year and 3 percent in 2013, the IMF said on Jan. 24, forecasting a shortfall of 6.8 percent this year and 6.3 percent in 2013.
The PP government inherited a bigger shortfall than the previous administration had projected, it said on Dec. 30, as the gap amounted to 8 percent, instead of the 6 percent target set with the EU. The goal for 2012 was made when the previous government expected the economy to growth 2.3 percent this year.
Prime Minister Mariano Rajoy, battling to rein in borrowing costs, called on European leaders to put the region’s permanent- rescue mechanism in place as soon as possible after meeting with German Chancellor Angela Merkel in Berlin on Jan. 26, while also reiterating a pledge to cut spending. Rajoy joins EU leaders at a summit in Brussels today.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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