Spain's economy shrunk more than expected in the second quarter, preliminary data showed today, a marked difference from surprise growth in neighbours France and Germany.
Gross domestic product dropped 1 per cent quarter-on-quarter, slightly more than a Bank of Spain forecast of 0.9 per cent, and contracted 4.1 per cent year-on-year, the sharpest fall since comparative data began in 1977.
“This was a bit disappointing and worse than we expected, since a number of indicators had improved in Spain over the last few months,” said economist at BNP Paribas Dominic Bryant.
Soaring unemployment and tumbling consumer confidence data recorded at the start of the year have shown some signs of easing in the last few months, prompting the government to claim the worst of the recession was over.
The Spanish figures followed an unexpected rise in second-quarter GDP in France and Germany yesterday, the euro zone's two biggest economies, marking the end of lengthy recessions there.
The euro zone economy shrunk by 0.1 per cent in the same period, flash data showed yesterday. The addition of Spain's figures to the pot, all other things being equal, could lead to a modest downgrade of the currency bloc's GDP number.
“We do expect Spain to do worse than other European countries for a few years ... (Germany and France) don't have the same imbalances as Spain, which means we expect it to stay weaker, for longer,” said Bryant.
Spain has had to contend with both the global financial crisis and the collapse of a decade-long property and construction boom. The government expects its budget deficit to spiral close to 10 per cent of GDP this year.
But the quarterly rate of contraction in GDP was almost half the 1.9 per cent decline recorded in the first quarter, an improvement which economists ascribed to a multi-billion-euro government stimulus plan.
Reuters