Page last updated at 09:23 GMT, Thursday, 14 May 2009 10:23 UK

Spanish economy shrinks rapidly

Construction cranes in Madrid
Spain's economy has relied heavily on construction

Spain's economy suffered its largest contraction in 50 years in the first three months of 2009, preliminary estimates have shown.

GDP fell 1.8% from the previous quarter and was down 2.9% year-on-year, the National Statistics Institute said. It will release final data next week.

Economists said the falls were the steepest seen since 1959.

Spain had enjoyed 14 years of consecutive growth before entering recession in the last quarter of 2008.

The near-collapse of its key construction industry has hit the economy hard.

The Spanish government has predicted GDP will shrink by 1.6% in 2009, while the European Commission has said it expects Spain to be the last European Union country to exit recession, probably in 2011.

"Although Q1 could mark the trough in the recession, any improvement in Q2 and beyond may be fairly modest," Ben May, European economist at Capital Economics said.

"Indeed, Spain's economic imbalances will ensure that it experiences one of the most prolonged downturns in the eurozone."



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