Spanish Economy Contracted More Than Forecast in Second Quarter
Friday, August 14, 2009 @ 12:09 PM
Spain’s economy contracted more than forecast in the second quarter, suggesting a recovery in Germany and France has yet to reach a country that was once an engine of growth for the euro region.
Gross domestic product declined 1.0 percent from the previous quarter, when it shrank 1.9 percent, the Madrid-based National Statistics Institute said in an e-mailed statement today. From a year earlier, it contracted 4.1 percent. The Bank of Spain estimated on July 30 that the economy contracted 0.9 percent in the second quarter and 4 percent from a year earlier.
Spain’s recovery is lagging behind that of other European countries as data yesterday showed the German and French economies both resumed expansion in the second quarter. Battling the highest unemployment rate in Europe at 18 percent, Spain has pumped money into the economy and is putting builders to work on public projects across the country.
“In the third quarter, you may get another contraction and after that some ups and downs, or flat readings,” said Dominic Bryant, an economist at BNP Paribas in London. “I just don’t think the recovery will gain any traction.”
Even as the government plans to inject 2.3 percent of GDP into the economy this year and further stimulus in 2010, Spain’s economy will continue to contract next year, the Organization for Economic Cooperation and Development forecast on June 24. It projects the Spanish economy will contract 4.2 percent this year and 0.9 percent in 2010, which would make it the worst performer of the 30 OECD nations after Hungary and Ireland.
Boom to Bust
As well as the global crisis, Spain is suffering from the collapse of a debt-fueled construction boom that has left around 1 million newly built homes unsold. Unemployment has doubled in two years, with construction workers leading the job losses, and Spain accounts for about half of the euro region’s increase in unemployed in the last year, according to Eurostat, the European Union’s statistics office.
International companies have cited Spanish business as a weak spot. Coca-Cola Co. said on July 21 that it saw weakness in Spain due to “significant macroeconomic challenges,” and Vodafone Group Plc said in May it had an impairment charge of 5.9 billion pounds ($9.7 billion), most of it related to Spain.
The economic slump has had a political cost as the ruling Socialist Party now trails the opposition in popular support, a poll by the state-run Center for Sociological Research showed on July 27.
Source: Bloomberg