MADRID, Spain—Spain slipped back into recession as the country’s economy contracted for the second quarter in a row, its central bank said.
A Bank of Spain monthly report said economic output shrank 0.4 per cent in the first quarter of the year, following a 0.3 per cent decline in the last quarter of 2011.
A technical recession is commonly defined as two consecutive quarters of economic contraction.
Prime Minister Mariano Rajoy has already pushed through a series of labour market and financial sector reforms and taken drastic deficit-reduction measures. The jobless rate is nearly 23 per cent and expected to rise.
The central bank said domestic demand dropped again, but foreign demand for Spanish goods rose, albeit at a slower pace than usual. For the first time in seven quarters, year-over-year GDP fell by 0.5 per cent.
It was only in 2010 that Spain emerged from nearly two years of recession, and now it is back in another one.
Investors are concerned the government might not be able to resurrect the economy and generate growth and jobs while drawing money out with austerity measures such as health care and education spending cuts and increases in income, property and corporate taxes.