MercoPress. South Atlantic News Agency

Spain slipping into 12-month recession says Central Bank

Spain is likely to slip into recession in the fourth quarter and stay there during 2009, Bank of Spain governor Miguel Angel Fernandez Ordonez said on Wednesday in Madrid.

His comments followed figures showing that the Spanish economy had contracted by 0.2% in the third quarter, the first shrinkage since 1993. "The scenario for the next quarters is very similar to that of the third quarter," Mr Ordonez said. The Euro-zone officially entered recession last week. Spain's economy has relied heavily on construction and consumer spending, but the global financial crisis and rising unemployment have hit economic expansion hard. Fernandez Ordoñez forecasted an intensified slump in spending on new construction projects, "with an abrupt halt in housing starts next year". Consumer spending will also slow further, he added. He said negative domestic demand could be countered by exports, if they remained robust, and a continued fall in imports. Analysts said that the third quarter figures reported by the National Statistics Institute where worse than expected. The International Monetary Fund has predicted that Spain's economy would grow by just 1.4% in 2008, slower than expected, and shrink by 0.7% in 2009. Spain's Labour Ministry reported at the beginning of November that the number of unemployed people in Spain had reached a 12-year high of 11.3%.