Spanish economy stalls in third quarter

 

Spain's fledging economic recovery stalled in the third quarter, when gross domestic product was unchanged from the previous three months as government austerity measures began to bite, official data showed Thursday.

It followed growth of 0.2 percent in the second quarter and 0.1 percent in the first, when Spain emerged from one of its worst recessions in decades.

On the year, gross domestic product expanded 0.2 percent after seven straight months of declines, the National Statistics Institute (INE) said in its preliminary estimate.

The third-quarter figure "reflects lower national income compared with previous quarters," the INE said.

The figures confirmed estimates by the Bank of Spain last week, which forecast "a weakening of economic activity, of a transitory nature, due in large part to the depletion of some expansive factors."

"These include the impact on national demand of the budget austerity measures adopted in May," it added.

The government has suspended dozens of road and rail projects and cut civil servants' wages as part of deep spending cuts aimed at reining in the massive public deficit.

It has forecast that the Spanish economy will shrink by 0.3 percent this year, following a fall of 3.7 percent in 2009.

In May it lowered its growth forecast for next year to 1.3 percent from 1.8 percent due to the impact of the tough new austerity measures.

The government aims to bring the public deficit down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013. The deficit hit 11.1 percent of GDP last year, the third highest in the eurozone after Greece and Ireland.

The measures were introduced at a time of rising fears that Spain and other southern members of the eurozone could follow Greece into a financial crisis.

The Spanish economy, Europe's fifth-largest, slumped into recession in 2008 as the bubble burst on a decade-long property boom and amid the global financial meltdown.

The INE is to release definitive figures for the third quarter on November 17.