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Spain’s 3.8pc growth in 2007 leads developed nations

15 February 2008

MADRID – The Spanish economy remained surprisingly robust at the end of 2007, outperforming all of the world’s most developed nations, but it is expected to weaken this year.

According to flash estimates released Thursday by the National Statistics Institute (INE), the economy for the whole of last year grew 3.8 percent, down a tad from 3.9 percent the previous year. In the final quarter of 2007, annual GDP growth slowed to 3.5 percent from 3.8 percent. The INE attributed this to lower domestic demand, which was only partially offset by a less negative contribution from net trade – imports minus exports.

The annual figures were in line with government and analyst estimates but the unexpected feature of the data was that on a quarter-on-quarter basis growth accelerated to 0.8 percent in the final three months of the year from 0.7 percent in the third quarter.

A spate of recent economic indicators, such as a sharp rise in jobless claims and a fall in industrial output in December, pointed to a downturn in growth at the end of the year due to a slowdown in the construction sector and lower growth in consumer spending due to higher interest rates.

The economy was also expected to show some of the effects of the liquidity crunch in the wake of the US subprime mortgage crisis in the summer of last year.

The GDP figures boosted the cause of the Socialist government ahead of general elections slated for 9 March, with the economy at the forefront of campaigning.

Economy Minister Pedro Solbes said yesterday he expected the current cooling of the economy was only temporary. The government, he said, could draw on its last year’s fiscal surplus of 2 percent of GDP to speed up public spending and growth. "The room for manoeuvre available insures the slowdown will be short," he said.

Solbes estimated Spain has an economic growth potential of closer to 3.5 percent rather than 3.0 percent. He predicted a continuing strong performance "if we do things more or less well."

Spain’s growth rate for 2007 was greater than that of all the G-7 nations and figures released yesterday by the European Union’s statistics office Eurostat showed that Spain continued to enjoy stronger growth than its partners in the bloc. Quarter-on-quarter GDP growth in the euro zone slowed to 0.4 percent in the last three months of 2007 from 0.8 percent in the previous quarter. On an annual basis, growth in the single European currency area eased to 2.3 percent versus 2.7 percent in the third quarter.

[Copyright EL PAÍS /Adrian Soto 2008]

Subject: Spanish news