Spain’s economy contracts at fastest rate in 40 years

| April 29, 2009 | 0 Comments

According to Bank of Spain estimates released today, the Spanish economy has shrunk by 1.8 percent in the first quarter and hinted that gross domestic product (GDP) has fallen by 2.9 percent in the last year, even though the Spanish government had, up until recently, said that the GDP decrease would be no more than 1.6 percent for the whole of 2009.

Prior to the global recession, Spain was one of the dominant forces in the EU economy but the nation has been hit hard, contracting at its fastest rate in 40 years following the collapse of the construction industry and the onset of recession.

Spain’s economic problems began with the construction industry and spread to its service industry during the first quarter of 2009 as the Bank of Spain said that the first quarter was an intensification of the trends and problems experienced in the economy at the end of 2008.

The Bank of Spain suggested that growth will not happen until the end of 2010, however the International Monetary Fund (IMF) forecasts predict that it will take until 2014 for the economy to go back to 2 percent annual growth.

Despite the gloomy forecast given by the IMF, they suggested that the Spanish government should take a stranglehold in the current crisis and undertake sweeping structural reforms in order to reduce the nation’s dependence on low skilled jobs by increasing productivity.

In related news, Spain has one of the highest unemployment rates in the euro zone after reaching 17.4% at the end of March.

Tags: Bank of Spain, , , , ,

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