Friday August 14, 05:48 PM
Spain's economy shrinks, bucking eurozone trend
By Denholm Barnetson
MADRID (AFP) - Spain's recession-hit economy shrank further in the second quarter, official data showed Friday, as a recovery underway elsewhere in the eurozone failed to reach its fourth-largest member.
However, the rate of contraction slowed in the three months to June, and the government said the figures reflected a "relatively better performance."
Gross domestic product contracted 1.0 percent in the second quarter from the first, the National Statistics Institute said in initial estimates.
Compared to the same period last year, GDP was off by 4.1 percent.
If confirmed by final figures on August 27, it would be the fourth shrinkage in a row after a fall of 1.9 percent in the first quarter, 1.0 percent in the last quarter of 2008 and 0.3 percent in the third quarter of 2008.
The latest figure was worse than an estimate of 0.9-percent contraction issued by the Bank of Spain last month. The central bank also said that the rate of contraction in the economy would continue to slow.
Spain, whose booming economy was once the envy of its neighbours, remains mired in its first recession for 15 years, with an unemployment rate close to 18 percent -- more than twice the eurozone average.
Its economy has proved especially vulnerable to the global credit crunch because growth relied heavily on credit-fueled domestic demand and a property boom boosted by easy access to loans.
Socialist Prime Minister Jose Luis Rodriguez Zapatero however said last week that "the worst of the crisis is over."
The finance ministry Friday pointed to the fact that the year-on-year fall of 4.1 percent was less than the eurozone average of 4.6 percent and of 4.8 percent in the EU as a whole.
"In relation to the economies of our immediate neighbours, the Spanish economy continues to show a comparatively better performance," it said in a statement.
The ministry said it was maintaining its forecast, issued in June, of 3.6 percent negative growth for the year.
It added that a rebound in other EU economies was "excellent news for the Spanish economy, which could positively affect both exports and the domestic tourism sector."
But the conservative opposition Popular Party leapt on the latest figures to call for a change in economic policy, warning the country "runs the risk of being left behind in the global economic recovery."
On Thursday, Germany and France led a surprise rebound out of recession, helping drag the 16-nation eurozone back towards positive territory in a further sign a global economic recovery is taking hold.
The two largest economies in the 16-nation eurozone enjoyed growth of 0.3 percent in the second quarter -- snapping a period of negative growth dating back to early 2008.
Official figures showed Portugal and Sweden had also exited recession.
However, the economy in the 27-nation European Union as a whole shrank by 0.3 percent in the second quarter, weighed down in part by a 0.8 percent drop in Britain and deep recessions in Central and Eastern Europe.
Analysts also warned that a painful legacy, namely in the form of rising unemployment, would not be shaken off so easily.
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