Spain scrapes out of six-quarter recession

7th May 2010, Comments 0 comments

Spain has scraped out of recession after six quarters of economic shrinkage, becoming the last major world economy to return to growth after the global financial crisis, the central bank said on Friday.

But the economy grew by only 0.1 percent in the first quarter, the bank said in a preliminary estimate, and the government warns more contraction is likely as the economy is forecast to shrink by 0.3 percent over the whole of 2010.

"GDP (gross domestic product) grew by 0.1 percent on a quarterly basis following six consecutive quarters of contraction," the bank said in a report.

"The pace of decline in internal demand slowed" in the quarter, it said.

Stimulus measures enacted by the Spanish government including a cash-for-clunkers scheme "have triggered a recovery in some aspects of spending, particularly household spending," it added.

Spain, Europe's fifth largest economy, entered its recession in the second quarter of 2008 as the global financial meltdown compounded a crisis in the Spanish property market, which had been a major driver for growth.

The heavily indebted country, which had a public deficit of 11.2 percent of output last year, has received a hammering on financial markets in recent days after its credit rating was downgraded by Standard & Poor's last week.

The Spanish economy contracted by 3.6 percent last year.

The government has adopted a 50-billion-euro austerity plan aimed at forcing the deficit back under the EU-mandated three-percent threshold by 2013.

But some observers are doubtful the government can achieve this aim due to Spain's low rates of economic growth.

The government has forecast growth of 1.8 percent in 2011, 2.9 percent in 2012 and 3.1 percent in 2013.

The International Monetary Fund estimates that growth in Spain will be only 0.9 percent next year.

© 2010 AFP

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