* GDP contracted 0.6 percent in Q4 versus Q3 -Bank of Spain
* GDP shrank 1.7 percent in Q4 year on year
MADRID Jan 23 Spain's economy shrank in the
final months of 2012 at the fastest pace since its recession
began, data showed on Wednesday, pummelled by falling domestic
demand and with no return to growth on the horizon.
The Bank of Spain said gross domestic product (GDP)
contracted 0.6 percent in the fourth quarter from the third,
compared to a drop of 0.3 percent in the July to September
The forecast in the central bank's monthly economic report
precedes preliminary growth data from the National Statistics
Institute on Jan. 30.
"These numbers are slightly better than we thought, but it
is a confirmation the economy is in a very bad state," said
Silvio Peruzzo, economist at Nomura.
"We expect a contraction of GDP of similar size in the first
quarter of this year, with that to be protracted through this
Spain's economy fell into its second recession since 2009 at
the end of 2011 on fallout from a burst property bubble and is
struggling to return to growth amid efforts to cut high public
and private debt and dire consumer sentiment.
A recent return by international investors to Spain's
battered debt market, where risk premiums have fallen
significantly from euro-era highs hit over the last year, has
not translated into the real economy, the central bank said.
"Despite positive developments in the international
financial markets in the last few months of the year, a
combination of a factors ... meant a notable weakening of final
demand in the fourth quarter," the bank said.
While the government expects the economy to expand again
before the end of 2013, many economists say this is optimistic.
GDP shrank 1.3 percent in 2012 year-on-year, the Bank of
Spain said, better than an official forecast of a 1.5 percent
drop and after growing 0.4 percent a year earlier.
The economy contracted 1.7 percent in the fourth quarter
from a year earlier, the central bank said, after falling 1.6
percent year-on-year in the third quarter.