Spanish recession deepens in first four months of 2009

Agence France - Presse

GDP plunged by 2.9 percent in the first quarter of 2009 compared to the same period last year, the bank said in its latest economic bulletin, citing estimates based on partially complete data for the period.

Key real estate sector

"The available indicators regarding the first months of 2009 point to an intensification of the contraction observed at the end of 2008 amid a severe international recession," it said.

The national statistics office will publish its first official GDP figures for the first quarter on May 14. If the estimates are confirmed, it will be the sharpest quarterly decline in Spain's GDP since 1970 and the deepest yearly drop in output since 1993.

Europe's fifth-largest economy entered into its first recession in 15 years at the end of 2008 as the outbreak of the global financial crisis hastened a correction that was already underway in its key real estate sector.

GDP contracted by 1.0 percent in the fourth quarter of 2008 over the previous quarter after declining 0.3 percent in the third quarter over the previous three months.

A recession is usually defined as two consecutive quarters of contraction in GDP. Prime Minister Jose Luis Rodriguez Zapatero said that while the first quarter "had been very negative for growth" he believed "it was probable that the worst had already passed."

"That does not mean that we are close to being in a positive situation, we are far from it, but I am convinced that the combined actions of EU nations will progressively bear fruit," he told a joint news conference in Brussels with European Commission President Jose Manuel Barroso.

Require many sacrifices

"We are far from where we would all like to be, we have a long, difficult road ahead of us that will require many sacrifices," he added. The Bank of Spain estimates the economy will contract by 3.0 percent this year, almost double the figure of 1.6 percent given by the Socialist government in January, and by a further 1.0 percent in 2010.

It sees the unemployment rate reaching 17.1 percent in 2009 and 19.4 percent in 2010.

Spain's unemployment rate rose to 17.36 percent in the first quarter of 2009 from 13.91 percent in the previous quarter, its highest level since 1998 and double the average in the 27-nation European Union.