Spanish economy stalls in third quarter: central bank

5th November 2010, Comments 0 comments

The Spanish economy stalled in the third quarter when deep government spending cuts intended to slash a ballooning public deficit hurt a fledgling recovery, the Bank of Spain said on Friday.

Spain's gross domestic product was unchanged in the third quarter from output in the previous three months and was up by 0.2 percent from the same year-ago period, it estimated in its latest monthly bulletin.

Europe's fifth-biggest economy emerged from the recession it entered during the second-half of 2008 due to the collapse of a property bubble with tepid growth of just 0.1 percent in the first quarter and 0.2 percent in the second.

"The available information for the third quarter suggest a weakening of economic activity, of a transitory nature, due in large part to the depletion of some expansive factors," the bank said.

"These include the impact on national demand of the budget austerity measures adopted in May," it added.

The government has suspended dozens of road and rail projects and cut civil servants' wages as part of the deepest spending cuts since Spain returned to democracy following the death of dictator Francisco Franco in 1975.

It aims to bring the public deficit down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013. The deficit hit 11.1 percent of GDP last year, the third highest in the eurozone after Greece and Ireland.

The measures were introduced at a time of rising fears that Spain and other southern members of the eurozone could follow Greece into a debt crisis.

The government forecasts that the Spanish economy will shrink by 0.3 percent this year following a fall of 3.7 percent in 2009.

In May it lowered its growth forecast for next year to 1.3 percent from 1.8 percent due to the impact of the tough new austerity measures it introduced.

© 2010 AFP

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