Struggling to reduce a massive public deficit, the Spanish economy sank into a recession in the first quarter of this year, according to new figures released by the country's National Institute of Statistics (INE) on Monday.
Gross domestic product (GDP), which represents the general state of the economy, contracted by 0.3 percent during the first quarter of 2012. It follows a contraction of 0.3 percent in the fourth quarter of 2011 and no change in the third quarter. GDP increased by 0.4 and 0.2 percent in the first and second quarters of 2011, respectively.
"This behavior was due to the negative contribution by domestic demand, partly compensated by the positive contribution of foreign demand," INE said in a report, noting that Monday's GDP figures are an advance estimate which is calculated within a simplified framework. The final GDP figures will be released on May 17.
Although the GDP contraction was slightly less than the 0.4 percent forecast, it is the second recession to hit Spain in just over two years. The euro zone's fourth largest economy is struggling to reduce a massive public deficit, meet European Union (EU) deficit limits and fix the banking system.
The Spanish government expects the country's economy to shrink by about 1.7 percent this year, followed by marginal growth of 0.2 percent in 2013. Other economists, such as at the Foundation of Spanish Savings Banks, expect the recession will continue well into 2013.
Spain has an unemployment rate of 23.6 percent, the highest in the EU.