Spain warned Thursday its jobs-starved economy will shrink at an even faster rate in the first quarter of 2012, plunging the country back into recession.
Economy Minister Luis de Guindos gave the grim forecast, piling on the agony after the economy shrank 0.3 percent in the final quarter of 2011 with a soaring unemployment rate of nearly 23 percent.
“The first quarter will be tough, very tough, this quarter could probably be the worst, worse than the final quarter of last year,” the minister told Onda Cero radio.
“Nevertheless I hope that the second quarter will be a bit less bad and that in the second half of the year we will already have a situation of stabilisation.”
A recession is broadly defined as two consecutive quarters of economic contraction.
Spain emerged only at the start of 2010 from an 18-month recession triggered by a global financial crisis and a property bubble collapse that destroyed millions of jobs and left behind huge bad loans and debts.
“But the future is not written in stone, it depends on us,” the economy minister said.
“That is where economic policy comes in: analysis, the measures we are taking, banking reform, labour market reform, the adjustment that has to be made in the regional governments’ public deficit,” De Guindos added.
“That is what in some way must bring Spain back to the path of growth and job creation.”
The grim forecast added to the gloom cast over Spain’s future by Prime Minister Mariano Rajoy the previous day, when he predicted that jobless queues will grow even longer.
Spain’s unemployment rate hit a 17-year record of 22.85 percent at the end of 2011 — the highest in the industrialised world — as the number of job seekers shot above the five-million barrier.
“Unfortunately, these figures will not get better in the short term. More than that; in 2012 they will get worse,” Rajoy, who took power in December after his Popular Party won by a landslide in November 20 elections, told parliament.
The Bank of Spain has forecast that Spain’s economy will shrink by 1.5 percent in 2012.
A report by BBVA Research this week said Spanish economic output would slide by 0.3 percent in the first quarter of 2012 and decline by 1.3 percent over the whole of 2012.
As activity declines, the unemployment rate is set to climb to 24.4 percent in 2012 and 24.6 percent in 2013, said the report by BBVA Research, analysis arm of the country’s second-biggest bank.
The government is struggling to trim a bloated public deficit so as to avoid being dragged back to the centre of a crisis of confidence in eurozone sovereign debt.
Rajoy has promised 8.9 billion euros ($11.7 billion) in new budget cuts, tax increases to rake in 6.3 billion euros, and an anti-tax fraud campaign to recoup about 8.2 billion euros.
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