Official statistics show that the Spanish economy shrank by .3 per cent during the first quarter of 2012. While this is not a large decline it is enough for Spain to be technically in a recession after two consecutive quarters in decline.
The new figures confirm the precarious state of the Spanish economy. Spain has a record 24.4 per cent unemployment rate the highest in the Euro zone. The contraction was caused by weaker demand with lower public and household spending as austerity measures take their toll.
Weaker growth in other parts of Europe have slowed exports and also tourism. However, exports did rise by 2.2 per cent while imports fell 7.2 per cent.
. Luis de Guindos Economy Minister predicted GDP would shrink by 1.7 per cent in 2012 but grow slightly by .2 per cent in 2013. Other forecasters were less optimistic with Commerzbank analysts predicting that Spain would still be in recession next year with a decrease in GDP of .3 per cent.
Spain's deficit last year was 8.5 per cent of GDP far off the 6.0 per cent agreed to with the EU. Austerity measures are supposed to bring the amount down to 5.3 per cent this year and to the EU ceiling of 3.0 per cent next year. This may be difficult to achieve if not impossible. For more see this article.