Spanish economy shrinks by 0.3% in fourth quarter
The Spanish economy shrank by 0.3% in the final quarter of 2011 from the previous three-month period, leaving it on the brink of recession, provisional data showed today.

The euro zone's fourth-biggest economy grew by 0.7% over 2011 as a whole, the national statistics institute said, adding to the year's bleak figures which included an unemployment rate of of 22.85%.

It was the first quarterly decline since the fourth quarter of 2009 and it confirmed predictions by the government and the central bank that the Spanish economy is heading back into recession.

A return to recession will make it harder for Spain's new government to meet its goal of slashing the public deficit to 4.4% of output this year from around 8% last year.

During the fourth quarter, economic activity experienced a "more negative contribution from internal demand, which was compensated in part by the positive contribution from exports which rose when compared with the previous quarter," the statistics office said in a statement.

The Bank of Spain predicted last week that the economy will fall into recession this year with a contraction in activity of 1.5% before recovering by about 0.2% in 2013. The central bank had previously estimated in March that the economy would expand by 1.5% this year.

Spain emerged only at the start of 2010 from an 18-month recession that was triggered by the global financial crisis and a property bubble collapse. The national statistics institute is to publish final gross domestic product figures for the fourth quarter on February 16.