BBVA forecasts ‘weak’ economic recovery for Spain

The Spanish economy will post a “weak” recovery this year with growth of 0.9 percent that will pick up to 1.9 percent in 2012, the country’s second-largest bank, BBVA, forecast Wednesday.

The BBVA forecast is more pessimistic than that of the government which predicts the economy will expand by 1.3 percent this year and by 2.5 percent in 2012.

“The recovery of the Spanish economy will continue to be weak in the short term,” the bank’s research department said in its latest quarterly bulletin.

Spain is fighting to revive its economy, Europe’s fifth-largest, and convince nervous investors that it will grow enough to bring its massive public deficit under control without resorting to a Greek or Irish style bailout.

The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of a credit-fueled property boom that had been the driver of growth for over a decade.

Last week the Bank of Spain estimated the economy shrank by 0.1 percent in 2010 after contracting 3.7 percent the previous year on the backs of growing exports.

BBVA said the growth of 1.9 percent which it forecasts for 2012 will “lower slightly” Spain’s unemployment rate, which hit 20.33 percent at the end of last year, the highest level in the industrialised world.

Stronger growth is key to the government’s goal of slashing Spain’s public deficit to below the a European Union limit of 3.0 percent of gross domestic product by 2013.

Spain’s public deficit hit 11.1 percent of GDP in 2009, the third-highest in the eurozone after Greece and Ireland.