MADRID: Sliding growth in exports to weakened trade partners and a continuing slump in domestic demand paralyzed the Spanish economy in the third quarter, official figures showed on Wednesday, fueling expectations of an imminent recession.
The Spanish economy failed to grow in the July to September period from a quarter earlier, confirming an earlier estimate, and grew 0.8 percent on an annual basis, revised from a previously reported 0.7 percent, the National Statistics Institute said.
The contribution of external demand to overall growth dropped to 2 percent from 2.5 percent a quarter earlier, while domestic demand had a negative contribution of 1.2 percent, INE said.
Spain is implementing a program of deep cuts in public spending to convince financial markets it can put its state debt on a sustainable footing and avoid a bailout like Greece and Portugal received.
"There's no way out once you start implementing austerity as a uniform policy in Europe. It was fine when we had expansion in Germany, France and Italy because the peripheries could export their way out of effectively recessionary conditions," economist at Citi Guillaume Menuet said.
"Now you've got budget tightening pretty much everywhere, it's impossible to think that those countries can continue to rely on trade as a driver of growth."
Menuet said Citi's central projection is the economy will shrink by between 0.2 and 0.3 percent on a quarterly basis for the next four quarters at least.
Only a vigorous export market has prevented the country falling back in to a recession, but the worsening euro zone debt crisis has taken its toll on Spain's main European trade partners which make up two thirds of its export market.
The euro zone economy grew just 0.2 percent in the third quarter from a quarter earlier and the European Commission expects the economy of the bloc to shrink 0.1 percent in the last three months of the year against the third quarter.
Spaniards are expected to elect a new government on Sunday in a resounding rejection of the Socialists' handling of the downturn, but the incoming centre-right People's Party has made little secret that they will continue with austerity measures.
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