It's official: Spain enters recession

Spain’s economy has contracted by 1.1 percent in the fourth quarter according to Bank of Spain estimates in its January monthly report.

The Bank of Spain predicts the unemployment rate, already the highest in the 27-nation European Union, will rise to 15.9 percent in 2009. International Monetary Fund warned the Spanish economy last month that it risks entering an extended period of stagnation unless sweeping structural reforms are carried out.

One of the main growth engines of Spain’s economy in recent years has been its construction sector. Given the collapse of the real estate bubble, Spain has suffered severely and is now going into reverse.

The Bank of Spain on the other hand attributes the 2008 deceleration to the decrease in consumer spending, ontop of what weight the housing sector may have had. Wishful thinking?

Image by rgarcia under Creative Commons.