Business View

The National Statistics Institute (INE) has confirmed that the Spanish economy back into recession, after falling 0.3% in the first quarter and added two consecutive quarters of contraction, which explained in the deterioration of the investment and public and private consumption.

While waiting to publish the definitive data on 17 May, the INE has advanced today that GDP fell 0.3% quarterly and 0.4% yoy, which in both cases is one tenth less than the estimates advanced last week by the Bank of Spain (BE).

Where I do agree the INE and the BE is in the diagnosis, since both institutions blamed the downturn in the economy to weak domestic demand (consumption and investment), compared to the strength of the external sector (exports and imports .)

However, the BE detailed in its analysis that foreign sales are growing half of what they grew in late 2011 due to the slowdown in world markets despite the gain in price competitiveness of Spanish products.

The BE says that the evolution of the economy in the coming quarters is uncertain and subject to the risk that may lead to new episodes of sovereign debt crisis in the markets by a lack of confidence in Spain’s ability to meet its objectives deficit.

Other analysts such as the Foundation of Savings Banks (Func) add to this uncertainty the restrictive effects on the economy are the government’s adjustment policies, which will keep falling all the indicators related to consumption and investment.

So, Funcas analysts expect the recession will deepen in the next quarter and do not believe that they can re-register quarterly growth rates to within a year.

The government expects the economy begins to stabilize since the last quarter of this year and for 2013 estimated that GDP will advance two tenths, which will be insufficient to generate net employment, which is not expected to occur until 2014.

By 2012, the Executive expects the economy will fall 1.7%, in line with estimates of agencies and national and international analysts, and expects the unemployment rate to peak at 24.3%, although some experts believe that it could reach 25%.

The Minister of Economy and Competitiveness, Luis de Guindos, insisted today that the Government is making decisions to change the direction of the economy and stressed that structural reforms are those that lay the foundation for recovery and change model “brick” to knowledge.