Spain Remains Stuck In Recession

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The Spanish economy remained in recession in the final quarter of 2009, data released by the government showed on Thursday.

Spain's gross domestic product decreased 0.1% quarter-on-quarter in the three months through December, the National Statistics Institute said. The result came exactly in line with analyst expectations and follows a 0.3% decrease in the September quarter.

The slowdown in contraction was the result of a less negative contribution of domestic demand and of the positive contribution of the overseas sector, the statistical office said.

The Spanish economy has now contracted for seven consecutive quarters and it remains the last major economy to still be mired in recession.

The National Statistics Institute said GDP slumped 3.1% compared to a year ago, roughly matching expectations after the 4% decrease in the preceding quarter.

Spain has the largest unemploment rate in the eurozone at 20%, with some 44.5% of under 25s without a job.

"As far as the near-term outlook is concerned, Spanish business surveys keep lagging significantly the recovery which is underway in the country's peers," said Tullia Bucco, an economist at UniCredit Bank in Milan.

"At present, we expect that the country will exit recession only in the second half of 2010," he continued.

The collapse of the property sector sparked Spain's recession, with the services sector also being weak. The government unveiled a number of stimulus measures to support the stricken economy and in the process racked up a massive budget deficit.

Ben May, an analyst at Capital Economics, said a return to solid and sustained growth was unlikely any time soon.

"Most of the government's emergency support measures are now coming to an end and forthcoming tax hikes are likely to reduce households' disposable incomes by up to 1% this year," he noted.

"And with the highly indebted private sector likely to be unwilling or unable to borrow and exporters hampered by a lack of competitiveness, it is difficult to see who can pick up the reins."

Spain's bulging deficit - estimated at 11.3% of gross domestic product in 2009 - has led some observers to question whether the country can repay its debts.

On Wednesday, Spanish Prime Minister Jose Luis Zapatero defended the solvency of the country, claiming the economy was "not worse than six months ago", and claimed the Iberian nation was "on the verge" of coming out of recession.

The Spanish economy remained in recession in the final quarter of 2009, data released by the government showed on Thursday. (Market News Provided by RTTNews)