Spain economy did worse than thought in 2010, 2011

MADRID (Reuters) - Spain's economy performed far worse than initially thought in both 2010 and 2011, data showed on Monday, suggesting the country may find it even harder to emerge from a recession that threatens to push it into seeking a sovereign bailout.

The economy shrank 0.3 percent in 2010 and grew 0.4 percent last year, according to the revised data from statistics institute INE.

The figures, respectively 0.2 percentage points and 0.3 points below preliminary estimates, prompted a short-lived selloff on Madrid's IBEX share market.

But analysts said they did not believe the data would have an effect on government forecasts for this year's gross domestic product and public deficit, though the market consensus could dip.

"The only revision that these GDP data may cause is changes to private analyst forecasts," Santiago Sanchez, economist at Carlos III University in Madrid, said.

Prime Minister Mariano Rajoy's conservative government widened the official forecast for Spain's 2011 deficit to 8 percent of GDP last December shortly after coming to power, reflecting a slowing economy and chronically high unemployment rates and debt servicing costs.

In May, it estimated the fiscal gap for the year had reached 8.9 percent.

The previous centre-left administration had targeted a 2011 gap of 6 percent.

This year, Madrid expects a deficit of 6.3 percent and a GDP contraction of 1.5 percent, which roughly tallies with the market consensus for both figures.

The International Monetary Fund expects Spain's economy, which slipped back into recession in the first quarter of this year, to shrink by 1.7 percent.

Monday's data "doesn't change the overall outlook for Spain, but it's a further note of concern in the current juncture," said Tullia Bucco, economist at UniCredit.

On Thursday, three euro zone sources told Reuters Spain was negotiating with euro zone partners over conditions for aid to bring down its borrowing costs, though the country had not made a final decision to request a bailout.

Madrid has already agreed to a European rescue package worth up to 100 billion euros ($125.17 billion) for the country's banks, weighed down by a burst property bubble.

INE said Monday's GDP changes were a result of new structural data and revisions to preliminary figures.

The 2011 revision also incorporated slightly weaker exports than first thought, it said.

INE publishes quarterly GDP breakdowns on Tuesday, along with final data for the second quarter of 2012, expected to confirm output fell by 0.4 percent on a quarterly basis.

UniCredit's Bucco said it would be important to look at which quarters were revised most in 2011, which would provide a clearer indication of how the growth outlook for coming quarters might have changed.

($1 = 0.7989 euros)

(Additional reporting Manolo Ruiz; Editing by John Stonestreet)

Source: http://news.yahoo.com/spain-economy-did-worse-thought-2010-2011-125620888--business.html

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