Spanish economy shrank 0.7 percent in fourth quarter

The Spanish economy shrank 0.7 percent on a quarterly basis in the last quarter of the year and declined 1.8 percent from a year earlier as the government’s austerity drive deepened the country’s second recession in three years.

The National Statistics Institute (INE) said Wednesday that output for the full year was down 1.37 percent. The figures were somewhat worse than estimates released last week by the Bank of Spain that pointed to a quarterly contraction in GDP of 0.6 percent and an annual fall of 1.7 percent. It also calculated activity shrank by 1.3 percent for the full year.

Output shrank a more modest 0.3 percent quarter-on-quarter in the period July-September as consumers brought forward purchases of big-ticket items ahead of the hike in value-added tax rates at the start of September. On an annual basis, GDP was down 1.3 percent in the third quarter.

The INE said the contraction in the fourth quarter was the “result of a more negative contribution from domestic demand, partly offset by a positive contribution by external demand.”

The fourth quarter was the worst since 2009 when the country was also in recession. The INE is due to publish a breakdown of the GDP figures on February 28.

The government expects the economy to shrink by only 0.5 percent, but the IMF and the European Commission, in line with a majority of experts, believe the contraction is likely to be triple that figure.