Spanish economy shrinks for the first time in two years

andres del risco

Fears of a recession are growing in Spain as the economy has shrunk for the first time in two years.

The Spanish economy contracted by 0.3% in the three months up to December 2011. Economists have subsequently expressed concerns over a possible recession.

"Some countries in the eurozone may just avoid a recession, but that may be more difficult for Spain,” Royal Bank of Scotland Economist Nick Matthews told the BBC.

"Given the need for fiscal consolidation in the country and the pressure that puts on domestic demand, it's going to be very difficult for Spain to avoid recession," he added.

Household spending fell by 1.1% on the previous quarter and spending on public bodies fell by 3.6%.

Spain has the highest job rate in the EU with one in four people being out of work. The unemployment levels are consistently increasing, passing the 5 million mark at the end of last year.

Official figures show that the jobless figure in Spain now stands at 5.3 million, up from 4.9 million on the third quarter. This could be a good time for investors to make their move in Spain, whilst prices are declining.

The property market, for example, is currently experiencing a slump, allowing investors to snap up properties for office or home space whilst they are cheap.

Investors will also be pleased to know that whilst the Spanish economy has shrunk, demand for its debt is still relatively high, marking confidence in the Spanish economy.

Transfer Money to Spain

If you are looking to invest in Spain, think carefully about how you will be transferring money to Spain. Foreign currency exchange rates quoted by banks are usually worse than the exchange rates available through specialist currency dealers.

If you are sending money to Spain - which you will inevitably have to do if you are looking to make a property investment - be sure to compare the market before you purchase your overseas currency.

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Spanish economy shrinks for the first time in two years

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