The Spanish economy and property
Spanish economy close to contraction, deficit soars
MADRID: Spain could soon face its first economic contraction in 15 years, the country’s economy minister said yesterday as the latest statistics showed falling house prices, cuts in car production and a soaring budget deficit.
Spain’s government has long ruled out negative growth. But Economy Minister Pedro Solbes told Spain’s Antena 3 television channel: “In the next two quarters growth will be around 0.1% to negative 0.1%, and of course, this doesn’t change things very much.”
He was speaking just before official data showed Spain’s budget deficit surged to 14.6bn euros in the eight months to August as the government doled out tax cuts and cheap credit to slow the economy’s slide into recession.
Spain was the only one of the euro zone’s four biggest economies not to contract in the second quarter after Prime Minister Jose Luis Rodriguez Zapatero drained the budget surplus to fund a 38bn euro ($55bn) economic stimulus plan.
The European Commission estimates the Spanish economy has contracted in the third quarter and will enter recession by year end.
Housing ministry data published on Tuesday showed home sales fell 31.5% in the second quarter of this year compared with the same period of 2008, underscoring the pain consumers are feeling after the bursting of a decade-old property boom that more than tripled the value of their homes.
Spain’s car industry group Anfac yesterday said vehicle production halved in August, that sales would fall 25% in 2008, and that a government plan to encourage sales was failing miserably as it was too complex for consumers to understand.
Labour Minister Celestino Corbacho yesterday stuck by an estimate unemployment would peak at an average 12.5% in 2009 before improving.
At 11% in July, Spanish unemployment was the highest in the eurozone and sent consumer confidence to a record low.
