Bank of Spain sees economy shrinking only slightly in second quarter

MADRID Tue Jul 23, 2013 5:18am EDT

MADRID (Reuters) - The Spanish economy shrank 0.1 percent in the second quarter, the Bank of Spain estimated on Tuesday, the smallest drop since the country slid into recession at the end of 2011.

Gross domestic product probably dropped 1.8 percent in the second quarter year on year, the bank said, after falling 2 percent a quarter earlier. The economy shrank 0.5 percent quarter on quarter between January and March.

Spain's economy has been in and out of recession since a property bubble burst in 2008, with domestic demand dragged down by dire consumer and business sentiment and only exports helping offset otherwise shrinking output.

"Between April and June, confidence indicators showed a progressive improvement which could point to a more favorable domestic spending in the next few quarters," the central bank said.

The government has said it expects the economy to emerge from recession by the third quarter, though many economists are less optimistic, with the International Monetary Fund seeing economic contraction into next year.

The National Statistics Institute publishes preliminary second quarter GDP figures July 30.

(Reporting By Paul Day; Editing by Julien Toyer, John Stonestreet)