Spain sinks deeper into recession: Central Bank

Spain’s Central Bank says the country will sink deeper into recession with a high unemployment rate as its economy is set to contract again this year.

The Bank of Spain’s annual report published on Tuesday showed that the economy is set to contract again by 1.5 percent this year following a 1.4 percent contraction last year, before starting to recover in 2014.

The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).

The contraction is attributable to the looming effects of EU austerity measures, which have intensified domestic problems including a rampant unemployment crisis.

The bank predicted that the unemployment rate will hit new record highs of over 27 percent, standing at 26.02 percent in the fourth quarter of 2012 – with 5.04 million jobless in February 2013.

The country’s GDP is also expected to shrink by 0.5 percent and weigh in on every aspect of economic activity.

“Private agents remained immersed in a process of deleveraging, families have seen a notable shrinking of income, public accounts continue on their path toward sustainability and residential investment has not yet hit bottom,” said the bank report.

According to the report, Madrid will lower the country’s budget deficit to 6 percent of the GDP by the end of 2013, but will likely miss the 2014 target set by the European Commission.

Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008, taking with it millions of jobs.

The Spanish government has been sharply criticized over its austerity measures that are particularly targeting the middle and working classes.