Spain central bank warns of sluggish growth

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Spain's central bank warned Wednesday the country's economic growth will come close to zero with a further slowdown in the third quarter, dampening the government's hopes for 1.3 growth this year.

"The data available for the third quarter of the year show generally lethargic activity," dragged down notably by falling consumer spending, the Bank of Spain said in a monthly economic report.

Spain's economy grew 0.4 percent in the first quarter of 2011 but this slowed to 0.2 percent in the second on a quarter by quarter basis, according to official figures.

Growth in the second quarter was 0.7 percent compared to the same period a year ago, casting doubt on the government's target of 1.3 percent growth for 2011 overall.

The bank, along with the International Monetary Fund and certain credit raters and private banks, has previously forecast much lower growth of 0.8 percent for Spain this year.

With economists warning of a second recession, the government's spokesman Jose Blanco on Friday said it maintained its growth targets but acknowledged that "in a new and difficult climate, they will be difficult to achieve."

The government releases its third-quarter figures in November.

Spain enjoyed a decade of strong growth driven by a property bubble that burst in 2008 and has suffered acutely from the subsequent economic downturn.

Unemployment is close to 21 percent and cuts to social budgets are beginning to bite.

© 2011 AFP

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