Spanish economy stutters ahead in April: central bank

31st May 2010, Comments 0 comments

The Spanish economy, which edged out of recession in the first quarter, showed some signs of recovering further in April, the Bank of Spain said on Monday.

But the effect of tension on the sovereign debt market had not yet been taken into account, the bank said.

On Friday, rating agency Fitch downgraded the standing of debt issued by Spain by one notch from the highest possible rating of AAA to AA plus.

Fitch said that the economy was set for weak growth owing notably to an overhang of private debt, and despite action announced by the government to cut its public deficit.

The central bank said in its monthly bulletin on the economy in May that scanty information available on the second quarter of the year showed in general that a recovery of confidence was continuing.

But the short-term effect of turmoil on the Spanish sovereign debt market in recent weeks, and the response of the government in adopting tough measures to correct budget overspending, had not yet been measured, the bank said.

The Spanish economy, hit by the bursting of a property boom, entered recession at the end of 2008 and struggled to switch into growth in the first quarter of this year expanding only 0.1 percent from the previous quarter.

In the last few weeks there has been high tension on the Spanish debt market because of high Spanish budget deficits.

In 2009, the deficit shot up to 11.2 percent of output. This pushed up the interest rate demanded by savers to buy Spanish debt. The credit rating agency Standard and Poor's has also downgraded Spanish debt.

© 2010 AFP

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