MADRID, APRIL 30 – Spain’s economy slipped into
recession in the first quarter as domestic demand shrank, data showed on Monday, with deep government spending cuts in an
uphill battle to trim the public deficit likely to delay any return to growth.
in Madrid, April 19, 2012. Spain entered its second recession since 2009 in the first quarter after more than four years of
contraction or minimal growth in the aftermath of a collapse in its property market. REUTERS/Andrea Comas
Gross domestic product shrank 0.3 percent in
January-March from the previous quarter according to preliminary National Statistics Institute data, unchanged from
October-December and compared to a Reuters poll expecting a 0.4 percent contraction.
Madrid is under intense pressure
from its European peers to streamline the euro zone’s fourth largest economy, reduce a massive public deficit and fix a
banking system battered by a four-year economic slump and a burst property bubble.
On an annual basis the economy
contracted by 0.4 percent compared with growth of 0.3 percent in the previous quarter, the data showed. Economists polled by
Reuters, as well as the Bank of Spain, had forecast a slippage of 0.5 percent.
“Spain’s still very much recession and
we think that this isn’t going to improve soon. It’s likely they’ll have to create more fiscal tightening in order to
catch up if they wish to avoid going in to plan, and that’s going to be counterproductive,” economist at Citi Guillaume
Menuet said.
The Spanish government’s updated economic stability plan, published on Friday before sending it to the
European Commission, saw an estimated contraction of 1.7 percent in 2012 turning to 0.2 percent growth by next
year.
(By Paul Day; Editing by John Stonestreet)
