Spanish economy in ‘slow recovery’

Spain’s economy pursued a “slow recovery” in early 2011, the Bank of Spain said yesterday, after joining crisis-torn Greece and Ireland as the only eurozone economies to shrink in 2010.

Spain is fending off fears in international financial markets that its public deficit is unsustainably high and could prompt the country to follow Greece and Ireland into seeking an EU-IMF bailout.

Economic activity will need to pick up speed if Madrid is to meet its target of slashing the public deficit to below the European Union limit of three per cent of annual economic output by 2013 from 9.24 per cent last year.

“The indicators for the first few months of 2011, while still scant, point in general to a continuation of the path of slow recovery of activity with characteristics similar to the end of last year,” the Bank of Spain said in its monthly bulletin for February published yesterday.

The bank said consumer sentiment was “clearly improving”, with average confidence levels in January and February sharply ahead of the fourth quarter of 2010.

The Spanish economy slum-ped into recession in the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market, which had fuelled growth for over a decade.

It inched out of recession with feeble or flat quarterly economic growth rates in 2010. Over the year as a whole, Spain’s gross domestic product declined 0.1 per cent, after contracting 3.7 per cent in 2009.

The Spanish government predicts the economy will expand 1.3 per cent this year but the International Monetary Fund has tipped more moderate growth of just 0.6 per cent.

Spain’s deficit-reduction tar-gets are based on its forecast that the economy will grow by a far more robust 2.5 per cent in 2012 and 2.7 per cent in 2013.

Spain’s industrial production grew 3.8 per cent in January from the same month last year, after falling 0.1 per cent in December, the national statistics institute said earlier yesterday.