“In 2008 to date, the adjustment of the Spanish economy that began last year has continued intensifying in a climate of heightened international financial instability which has come to a head in October,” the Bank of Spain said. The Spanish economy, the fifth-biggest in the European Union, expanded by 3.7 percent
The Bank of Spain’s forecast bears out widespread expectations that the once fast-growing economy is now flirting with recession, defined as two consecutive quarters of falling output.
The International Monetary Fund predicted earlier this month that Spain’s economy would expand just 1.4 percent.
”Spain will be harder hit than other European countries because of the boom in the housing sector that the country has experienced,” the director of the IMF’s research department, Olivier Blanchard, said on October 8.
Spain’s Socialist government disputed the IMF forecast, saying it did not take into account recent interest rate cuts and the drop in oil prices.
”For the first time in the last 14 years, total economy-wide employment fell relative to the same quarter a year earlier, more markedly in the market economy and, above all, in construction,” the Bank of Spain said.
