(RTTNews) - Spanish gross domestic product contracted in the fourth quarter, confirming that the economy entered its first recession in 15 years.

Data released Thursday by the National Statistics Institute showed that the GDP fell 1% sequentially in the fourth quarter, following a revised 0.3% drop in the third quarter. Two consecutive quarters of decline in GDP defines recession. The decline in the final quarter of 2008 was smaller than economists’ expectation of a 1.1% drop.

Year-on-year, the GDP contracted 0.7% in the fourth quarter, reversing a 0.9% growth in the previous three months. Economists expected a fall of 0.8% for the fourth quarter. For the whole year of 2008, the economy logged a real growth of 1.2%.

The Bank of Spain had revealed in a report last month that the economy was in recession, after the GDP contracted in the last two quarters of 2008. The central bank had forecast 1.1% shrinkage in the fourth quarter GDP. The International Monetary Fund also had said the Spanish economy was in recession mode.

Spain’s economy was widely believed to be in recession following the end of the construction boom amid the global financial crisis. Recent economic data had strengthened that view. Most analysts expect the situation to turn worse going forward.

Industrial output, an important indicator of the performance of the economy, showed a record fall in December, plunging 19.6% year-on-year, much bigger than the 15.3% drop in November. The slump in industrial output was led by a general weakness in all industries, with production in some showing declines for several months.

Housing prices fell for the first time in almost a decade in the fourth quarter, with the prices falling 2.3% quarter-over-quarter and 2.8% on a yearly basis.

In the job market, the picture looks increasingly dismal. Jobless rate hit 13.9% in the fourth quarter, one of the highest in the European Union. Data released by the Spanish Labor Ministry showed that on a yearly basis, the number of unemployed soared 47.12% to 3.327 million in January, after crossing the 3 million mark in December for the first time in several years.

Thursday, Moody’s Investor Service said among the countries carrying its top Aaa rating, Ireland and Spain had the most risk of downgrade. The rating agency categorized these countries as “vulnerable”. In January, Fitch Ratings affirmed Spain’s currency ratings, while Standard & Poor cut the country’s long-term ratings.

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