Spanish economy grows 0.1 percent in Q1 after 6 quarters in recession

Spain hobbles out of recession

MADRID — Spain’s economy took a tentative step out of recession by growing in the first three months of 2010 after six quarters of contraction, the Bank of Spain said Friday.

Gross domestic product rose by 0.1 percent from January to March, the bank said. However, the economy remained 1.3 percent smaller than a year earlier.

Finance Minister Elena Salgado said the figure “confirmed the government’s predictions” that Spain’s economy was recovering.

Spain has been the slowest of the major EU economies to emerge from recession.

The bank’s assessment was provisional and is due to be confirmed by the Finance Ministry next week.

It was the second piece of positive economic news this week for Spain after the Labor Ministry announced Tuesday that the number of people claiming unemployment benefits fell by 24,188 in April, the first drop in eight months.

The official unemployment rate for the first quarter, however, is at 20 percent with 4.6 million people out of work, according to the National Statistics Institute. That figure is double the EU average.

The bank said Spain’s large budget deficit remains a concern to the European Union amid fears that the crisis over Greece’s large debt load could spread to other countries with large budget shortfalls. Spain’s economy is four times the size of Greece’s, and last week Standard & Poor’s cut Spain’s credit rating from AA+ to AA.

But the Bank of Spain also said the economy — which was hard hit by a collapse of the housing market — had surpassed its “most acute contraction” in the first quarter of 2009.

The announcement however failed to convince investors in Madrid’s Ibex-35 bourse, which finished trading Friday down 3.3 percent and 13.8 percent for the week, its worst this year.

The EU predicts Spain’s economy will come out of recession in 2010, but not without some hiccups.

A European Commission economic forecast report this week said there would be growth in second quarter but that the economy might contract again in the third quarter before recovering in the final trimester.

“Some months or quarters will be up, others down, but it won’t be until the end of the year that we’ll see the economy properly recuperating,” Angel Laborda, a director of Spain’s Saving Bank Foundation, told Spanish National Radio.

For 2010 as a whole, real GDP is forecast to contract by one-quarter of a percent, followed by moderate positive growth of three quarters of a percent in 2011, the European Commission says.

Spain’s overall debt stood at 53 percent of economic output last year, and its deficit was equivalent to 11.2 percent of GDP. The government has enacted a €50 billion ($66.22 billion) austerity program aimed at getting the deficit down to the EU limit of 3 percent by 2013.

Salgado said the government would finalize its plan in the coming weeks.