Spain’s economy appears to be growing at the fastest clip since a 2008 property crash tipped the nation into a job-wrecking, double-dip recession, the central bank says.
The eurozone’s fourth-largest economy expanded by 0.4 per cent on a quarterly basis in the first three months of this year, the sharpest increase in six years, the Bank of Spain said in a report on Thursday, citing initial data.
It was the strongest performance since the first quarter of 2008, when Spain was at the tail end of a decade-long property bubble whose collapse wiped out millions of jobs and flooded the nation in debt.
“We have rebuilt our economy in record time, we have better foundations and the wind is blowing in our favour,” Prime Minister Mariano Rajoy boasted in a speech in Barcelona.
The Spanish leader said the economy would exceed the government’s official forecasts for growth of 1.0 per cent in 2014 and 1.5 per cent in 2015, tipping an expansion next year “well above” the target.
Spain’s central bank said that on an annual basis, the economy grew 0.5 per cent in the first quarter of 2014, the first year-on-year expansion in more than two years.
Spain emerged gingerly from a two-year downturn in mid-2013 and it still suffers from an unemployment rate of nearly 26 per cent.
The country managed to avoid an international bailout in mid-2012, a risk that haunted financial markets as the nation’s debt soared.
Investors took heart from the European Central Bank’s vow in late 2012 to come to the rescue of stricken eurozone members if needed.
Rajoy’s austerity measures and labour market reforms have helped to consolidate financial market support further.
In the latest sign that investors are now ready to lend to Spain at low rates, the Treasury managed to raise 5.6 billion euros ($A8.39 billion) on the bond market on Thursday with the benchmark 10-year yield sliding to 3.059 per cent from 3.291 per cent on April 3.
Economy Minister Luis de Guindos this week said he expected the economy to grow by an average of 1.5 per cent in 2014 and 2015.
“The goal is to achieve two years in a row of growth, with net job creation, and that will be the exit door from the Spanish crisis,” De Guindos said.
Nevertheless, jobs growth will be “clearly insufficient”, he said.
Latest revised data on Thursday showed the unemployment rate in the final quarter of 2013 stood at 25.73 per cent.
“A country with an unemployment rate of 26 per cent is starting at a terrifying level,” de Guindos said.
The Bank of Spain is predicting an unemployment rate still at 25 per cent in 2014 and 23.8 per cent in 2015.
It expects the economy to grow by 1.2 per cent in 2014 and 1.7 per cent in 2015, helped by exports and lower borrowing costs.
In its latest report, the Bank of Spain sounded a reassuring note on the risk of deflation, a phenomenon that can stall an economy as businesses and consumers postpone purchases in the hope of finding lower prices.
Though prices may fall at some points in the year ahead because of slack demand and temporary factors, the risk of a broad, persistent decline in consumer prices was “remote”, it said.