Spain to enter two-year recession in 2012

 

Goldman Sachs have forecast that a recession will hit the Spanish economy in 2012 and last until the end of 2013.

The American based bank predict that Spain's GDP looks set to shrink by 1.5% in 2012 and by 0.2% in 2013, although it expected the country's economy to grow by around 0.6% over 2011.

Prices are expected to fall with inflation dropping from the current rate of 3% to 1.4% for 2012 next year and falling to just 1.1% by the end of 2013, the bank predicted.

Spain saw zero growth during Q3 of 2011 and the incoming Popular Party government is expected to embark on a massive program of cuts to public spending early 2012.

The depressing news for Spain came along with revised predictions for the whole eurozone, which Goldman Sachs said would enter recession in 2012. The Economy of the Eurozone member states as a whole would contract by 0.8% in 2012, but return to a growth of 0.7% in 2013, the bank said.

Meanwhile, the European debt crisis will continue to be an important factor to influence the behavior of the markets, whose evolution will depend on the response of European governments to this continuing problem.