Spanish growth at 15-year low, recession seen
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Spanish economic growth fell less than expected in the second quarter but was the weakest in 15 years and the data did little to dispel fears of a looming recession as Spain's housing and credit booms implode.
Gross domestic product in Spain, the euro zone's fourth-largest economy, grew 0.1 percent in the second quarter compared with 0.3 percent in the first, the National Statistics Institute (INE) reported in a preliminary estimate.Â
It was the worst result since late 1993, when Spain emerged from its last recession and housing crisis, but not as bad as a Reuters poll which forecast zero growth.
Spain was the only one of the euro zone's four largest members not to contract in the second quarter, but analysts said the economy was now shrinking due to soaring unemployment and record falls in retail sales and industrial production.
"We expect a mild recession in the second half of the year," said Susana Garcia at Deutsche Bank, adding that she expected Spain's economy to contract 0.1 percent in 2009.
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Swaying the Spanish result was a steep fall in domestic demand which slammed imports and allowed the external account to contribute to growth for the first time in years, INE reported.
Spain's year-on-year second quarter growth beat expectations, falling to 1.8 percent from 2.7 percent in the first quarter, after a Reuters poll predicted 1.7 percent growth.
Spain posted results ahead of euro zone data at 0900 GMT expected to show the bloc's economy shrank 0.2 percent, marking its first contraction since monetary union.
Spanish Prime Minister Jose Luis Rodriguez Zapatero has interrupted his holidays to speed up implementation of previously announced reforms, tax cuts and credit injections meant to prevent recession.
His popularity has dropped to its lowest ever level this year after Spain plunged into a crisis he long predicted would never happen.
Spanish unemployment rose to the highest rate in the European Union in June after the global credit crunch burst Spain's property bubble, forcing bankrupt building and real estate firms to lay off hundreds of thousands of workers.
Economy Minister Pedro Solbes does not rule out a recession, possibly beginning in the final quarter of 2008, before a recovery in the second half of 2009.
He sees growth of 1 percent in 2009 before a recovery to around 3 percent in 2010 as consumer spending and housing demand recover.
Analysts fear years of stagnation after Spanish governments failed to diversify away from construction, cheap credit and low-skilled jobs that drove 14-straight years of growth.
"The precondition is that Spain gets its act together on the export front," said ING Senior Economist Martin van Vliet. "Spanish price competitiveness has deteriorated very sharply in the past decade."