De Guindos confirms that Spain will start the year in recession

MADRID | All the Spanish press reported the new Minister of Economy, Luis de Guindos’ statements when he confirmed on Tuesday what everyone already knew: that Spain would go into recession in 2012. According to his predictions, the first trimester of 2012 will register a negative growth, just like the last trimester of this year in which the GDP will decrease by between 0.2% and 0.3%.

During the inauguration of the new senior members of the Ministry of Economy, De Guindos pointed out that the next two quarters

“aren’t going to be easy”: not for the GDP nor for the creation of employment, and he added that to make forecasts for more than six months “is very difficult” but that despite everything “the difficult situation will be an incentive to boost the necessary reforms.”

In Madrid, financial analysts have evaluated this news from different points of view. Bankinter underlines that the minister did not employ the term ‘recession’ but rather ‘deceleration’ and they estimate that

“there will exist an atmosphere of contraction for all of the quarters of 2012, with an average GDP of 0.6% in our baseline scenario and a -1.2% for our pessimist one. By the 1Q’13 it will be flat to then end 2013 with approximate average of +0.6% as the baseline scenario.”

Meanwhile, Renta 4 experts note that the announcement by Luis De Guindos, in principle,

“should be more than a given by the market.” In fact, they conclude by saying that “we value favorably the fact that the first estimates that the new government announces seem more realistic than the ones made by the former executive.”