* Spain Q1 GDP shrinks 0.3 pct q/q, 0.4 pct y/y
* Data shows country back in recession
* Stats institute says drop due to domestic demand
* More fiscal tightening on cards, says analyst
MADRID, April 30 (Reuters) – Spain’s economy slipped into
recession in the first quarter as domestic demand shrank, data
showed on Monday, with deep government spending cuts in an
uphill battle to trim the public deficit likely to delay any
return to growth.
Gross domestic product shrank 0.3 percent in January-March
from the previous quarter according to preliminary National
Statistics Institute data, unchanged from October-December and
compared to a Reuters poll expecting a 0.4 percent contraction.
Madrid is under intense pressure from its European peers to
streamline the euro zone’s fourth largest economy, reduce a
massive public deficit and fix a banking system battered by a
four-year economic slump and a burst property bubble.
On an annual basis the economy contracted by 0.4 percent
compared with growth of 0.3 percent in the previous quarter, the
data showed. Economists polled by Reuters, as well as the Bank
of Spain, had forecast a slippage of 0.5 percent.
“Spain’s still very much recession and we think that this
isn’t going to improve soon. It’s likely they’ll have to create
more fiscal tightening in order to catch up if they wish to
avoid going in to plan, and that’s going to be
counterproductive,” economist at Citi Guillaume Menuet said.
The Spanish government’s updated economic stability plan,
published on Friday before sending it to the European
Commission, saw an estimated contraction of 1.7 percent in 2012
turning to 0.2 percent growth by next year.
