Spain’s feeble recovery falls flat before election
Spain's feeble economic recovery petered out in the third quarter of 2011, official figures showed on Friday, stoking recession fears just nine days before a general election.
Economic growth fell to zero from the previous quarter, when activity was already weak with growth at just 0.2 percent, said a preliminary estimate by the National Statistics Institute.
The economy expanded just 0.8 percent in the third quarter when compared to output in the same period last year, the report said.
It was bleak news for the Socialist government, which faces a predicted drubbing at the hands of the opposition conservative Popular Party in November 20 elections.
The government is refusing to alter its seemingly optimistic forecast for 1.3 percent growth in 2011.
The latest figures spell tough times ahead for Spain, which is fighting to preserve growth even as it slashes spending to curb its budget deficit and avoid joining Greece and Italy in the eurozone debt crisis.
Only exports, including tourism, kept Spain’s economy out of the red as consumers kept a tight hold on their wallets in the latest quarter.
“External demand continues to show an elevated contribution to growth, which is partially offset by the negative contribution of domestic demand,” the statistics institute said.
Both the Bank of Spain and the New York-based credit rating agency Standard and Poor’s are predicting Spanish economic growth in 2011 of 0.8 percent, far below the government’s target.
Analysts at Spanish bank BBVA warned in a report this week that Spain is increasingly likely to fall into a recession with economic output likely to shrink in the final quarter of this year
“The Spanish economy is stagnating and the probability of it entering into recession is increasing,” it said.
“During the last three months, the uncertainty regarding the perspectives for the global economy have increased, which has had a negative effect on the expected recovery of the Spanish economy.”
The probability that the economy will return to recession — broadly defined as two consecutive quarters of negative growth — has been raised by a growing number of financial institutions.
Goldman Sachs forecasts that the economy will shrink 0.2 percent during the fourth quarter and by another 0.2 percent in the first quarter of 2012, with French bank Natixis putting the contraction at 0.2 percent and 0.1 percent.
The Spanish economy fell into recession during the second half of 2008 as the global financial meltdown compounded the collapse of a labour-intensive property bubble.
It stabilised in 2010 but has remained weak this year.
Spain has promised to reduce its annual public deficit from 9.3 percent of GDP last year to 6.0 percent this year, 4.4 percent in 2012 and 3.0 percent, the European Union ceiling, in 2013.