Spain economy weakens in last quarter: central bank

30th November 2011, Comments 0 comments

Spain's stalled economy weakened even further in the final quarter of 2011, the central bank said on Wednesday, adding to economists' warnings of a fresh recession ahead.

Markets are closely watching Spain's economic and financial health as it fights to avoid being engulfed by a debt crisis that economists warn could break up the eurozone.

"The preliminary information currently available indicates that the last months of the year have seen an increase in the weakness of demand and activity," the Bank of Spain said in a monthly report.

It blamed "the resurgence of financial tensions as a result of the deepening of the eurozone sovereign debt crisis, and the worsening of the growth outlook worldwide."

The Spanish economy has struggled for two years since emerging from a recession triggered by the 2008 housing bubble collapse, and unemployment has climbed to 21.5 percent.

Growth reached 0.4 percent in the first quarter of 2011 compared to the previous three months and 0.2 percent in the second, before slumping to zero in the third, according to official data.

On a 12-month comparison, growth was 0.8 percent in the third quarter compared to the same period in 2010 and the Bank of Spain has forecast growth at that pace for the whole of 2011.

Goldman Sachs and French bank Natixis forecast an economic contraction in the current quarter and the next, which would put Spain technically in recession.

The central bank also said Spain had narrowed the deficit on its current account -- the broadest measure of foreign trade -- in September by 10.3 percent compared to a year earlier.

Spain's governing Socialists have implemented spending cuts to rein in the public deficit and a newly elected conservative government due to take office next month has warned deeper cuts are on the way.

Data from the EU statistics agency Eurostat on Wednesday put Spain's unemployment rate at 22.8 percent in October. The latest official Spanish estimate is 21.5 percent, the highest in the industrial world.

© 2011 AFP

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