The Spanish GDP contracted 0.4 percent in the second quarter of the year and 1 percent year-on-year, the Bank of Spain reported on Monday.
According to the Spanish institution, these results are due to the decrease of the domestic demand. Consumption and public administration demand diminished in the second quarter of the year causing a drop of 1.2 percent.
Enterprises also reduced their expense in goods and equipment (2.2 percent).
The institution points out that the economy slowed down quicker compared with the first quarter of the year. The GDP contracted 0.3 percent in the first three-month period of 2012.
The external demand acted as a counterweight of the drop in the Spanish domestic demand. Exports have slightly increased compared with the figure of the last quarter.
Regarding employment, the Bank of Spain informed that it decreased 4.6 percent year-on-year, meanwhile productivity raised at 3.8 percent.
The bank warns that the deficit target will be difficult to accomplish, although the institution says that last reforms promoted by the Spanish government could help to achieve it.
However, the Bank of Spain forecasts that prices will rise due to the increase of the Value Added Tax next September, one of the main measures passed by the Spanish government. Prices increased 1.9 percent on average in the second quarter of the year.
The Bank of Spain published this report when Spain is suffering a lot of pressure in the markets. The risk premium has passed on Monday the 600 point mark and the interest rate of the Spanish 10-year bond reached 7.56 percent./.