Spain’s Economy Shrinks Further in Q2

Spain’s recession deepened in the second quarter of the year, as the economy contracted 0.4 percent, according to the national statistics institute INE. In the first quarter of the year the country’s gross domestic product (GDP) shrank 0.3 percent.

Spain’s deteriorating GDP figures reflected “weaker domestic demand”, according to the INE.

The INE also said that Spain’s annual rate of inflation in July rose to 2.2 percent from 1.8 percent in June.

Despite the negative economic indicators, Spain’s 10-year borrowing costs fell to 6.6 percent from last week’s record high of 7.5 percent on expectations of action from the European Central Bank (ECB).

On Thursday this week, the ECB will announce its latest decision on interest rates. There is speculation that the Bank may also announce that it is restarting its bond-buying programme, known as the Securities Markets Programme (SMP). Some experts indicated that co-ordinated action between the ECB and the EFSF would be more effective in bringing down the borrowing costs of countries such as Spain and Italy.

Source: BBC

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