If we take stock of 2012, we can see that for the fifth consecutive year the Spanish economy ended the past year with a clearly unfavourable outcome in terms of growth and employment. The relapse into recession, which began at the end of 2011, continued throughout the year, with a contraction in real GDP of more than 1%. Nearly 700,000 jobs were lost and the unemployment rate exceeded an unprecedented 26%. Many factors contributed to the collapse in aggregate domestic demand.
So did the sharp decline in private consumption associated with the fall in households’ disposable income, due to job losses and increased tax pressure. Also contributing was the contraction in business investment, which accompanied weak demand and excess installed capacity, as well as the inevitable restrictive stance of public spending, which has been aimed at reducing the sizeable deficit. Only the strong performance of the external sector, contributing more than 2 percentage points, helped to cushion the fall in GDP.
