MADRID: Spain's battered economy rallied further in the first quarter with 0.2 percent growth as reforms eased market fears it will be the next eurozone bailout case, the Bank of Spain said on Friday.
Spain has now successfully "decoupled from the group of countries most affected by the tensions on sovereign debt markets," it said three days after Portugal agreed rescue terms.
"Market perceptions came round to drawing this distinction thanks, among other reasons, to the new measures adopted to strengthen Spanish credit institutions' solvency and to the headway made in structural reform, following the approval of the draft bill on pension reform."
Spain, with an economy the size of the Greek, Irish and Portuguese economies combined, has been battling to convince markets that it should not be lumped together with the three lame ducks now under EU and IMF rescue terms.
The government has enacted reforms to strengthen bank balance sheets, cut state spending, make it easier to hire and fire workers, lower the retirement age and sell off assets.
"In the opening months of 2011, the Spanish economy continued growing at a weak rate against the background of the progressive recovery in the world economy, but one not free from the emergence of fresh causes for uncertainty," the Bank of Spain said.
The estimated first-quarter growth of 0.2 percent was the same as in the previous quarter. For 2010 as a whole, the economy contracted 0.1 percent.
The central bank said that household spending "continued to show signs of a weak recovery," and noted "the buoyancy of goods exports and the notable recovery in tourism."
Analysts remained cautious.
"The modest first quarter performance signals that Spain continues to face profound challenges to generate any significant growth in 2011," Raj Badiani of IHS Global Insight said in a research note.
"Apart from exports, the economy is struggling to find any other significant positive contribution to growth. Furthermore, consumers have yet to face the full impact of the tough austerity measures."
The BBVA bank said that although it had begun to recover in late 2010, "in practice the economy is stagnating. With these growth rates, you cannot create employment.
"The sovereign debt crisis confirms the importance of continuing reform efforts," BBVA Research said.
The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market. It emerged with meagre growth in early 2010.
Prime Minister Jose Luis Rodriguez Zapatero has vowed to bring the country's annual public deficit below an EU ceiling of 3.0 percent of output in 2013, from 11.1 percent in 2009.
The economy is also struggling with an unemployment rate that soared to 21.29 percent in the first quarter, the highest in the industrialised world.
The National Statistics Institute (INE) will release official first-quarter growth figures on May 13. The central bank's estimates are usually a good indication of the INE figures.
The Bank of Spain in March predicted the economy will grow by 0.8 percent in 2011 and 1.5 percent in 2012, well below the government's forecasts of 1.3 percent and 2.3 percent respectively.
BBVA Research on Friday confirmed its forecast of 0.9 percent growth in 2011.
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