Spanish GDP Contracts for Second Quarter, Bank of Spain Says

Spain’s economy contracted 0.4 percent in the first quarter, the Bank of Spain estimated, as the economy officially entered a recession that threatens to undermine its deficit goals.

Gross domestic product fell 0.5 percent from a year ago, the Bank of Spain said, citing estimates based on data that’s still incomplete. The National Statistics Institute publishes its first estimate on April 30.

Spain’s government is struggling to convince investors it can narrow the deficit by 3 percentage points of its GDP this year even as the economy contracts and unemployment exceeds 23 percent. The government forecasts a contraction of 1.7 percent this year.

Spain’s 10-year bond yield rose to 5.99 percent today from 5.96 percent on April 20, widening the gap over German equivalents to 432 basis points.

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