Spain's economy pursued a "slow recovery" in early 2011, the Bank of Spain said Friday, 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 3.0 percent of annual economic output by 2013 from 9.24 percent 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 on Friday.

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 slumped into recession in the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market, which had fueled 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 percent, after contracting 3.7 percent in 2009.

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

Spain's deficit-reduction targets are based on its forecast that the economy will grow by a far more robust 2.5 percent in 2012 and 2.7 percent in 2013.