Bloomberg News

Spain Won’t Fall Back Into Recession This Year, Salgado Says

October 05, 2011

(Updates with quote in second paragraph.)

Oct. 5 (Bloomberg) -- Finance Minister Elena Salgado said Spain won’t fall back into a recession in the second half, even as she declined to give a forecast for the full year.

“We foresee that in both the third and fourth quarters we will have positive growth,” Salgado said in an interview on Onda Cero radio today. She declined to give a new forecast for the full year and said any figure would be “different” to the ministry’s 1.3 percent estimate for 2011.

Spain’s export-led recovery from the worst recession in six decades slowed in the second quarter, leaving the unemployment rate at 21 percent. Activity showed “weakness” in the third quarter, the Bank of Spain said on Sept. 28, while the manufacturing and service industries contracted the most in more than two years in September, Markit Economics said this week.

Funcas, the research arm of Spain’s savings-bank association, forecasts the economy will “practically stagnate” in the second half of this year, leaving the full-year growth rate at 0.7 percent. The International Monetary Fund predicts an expansion of 0.8 percent in 2011.

The deepest austerity measures in at least three decades are undermining the recovery and the quarterly growth rate slowed to 0.2 percent in the second quarter from 0.4 percent in the previous three months. The government, which faces a general election on Nov. 20 that polls indicate it may lose, aims to cut the deficit to 6 percent of GDP this year, from 9.2 percent in 2010, and Salgado said that takes “priority” over growth in the “remaining months of the year.”

“It’s obvious that the adjustments cause economic difficulties,” she said. “The economic slowdown doesn’t just come from the cuts; it comes from citizens’ lack of confidence, financing difficulties, a global financial sector that doesn’t seem to be at 100 percent of capacity or fully cleaned up.”

--Editor: Andrew Davis, Andrew Atkinson

To contact the reporter on this story: Emma Ross-Thomas in Madrid at

To contact the editor responsible for this story: Craig Stirling at

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