MADRID (AP) — Spain's central bank said Friday the economy grew 0.2 percent in the fourth quarter compared to the third, and that for all of 2010 it contracted less than the government had forecast — good news for a country trying to dispel fears it might need a bailout.
The Bank of Spain said it estimates gross domestic product fell 0.1 percent in 2010, less than the 0.3 percent decline officially forecast in the latest budget.
The bank's quarterly GDP figures are preliminary. They are usually followed a week later by official numbers from the National Statistics Institute, although these tend to agree with the bank's.
Prime Minister Jose Luis Rodriguez Zapatero said Friday his government was determined to forge ahead with structural reforms in a bid to continue making the Spanish economy more competitive.
Speaking at the European Union summit in Brussels, Zapatero also said Spain would maintain its program for fiscal consolidation within the troubled savings bank sector.
Zapatero explained why unlisted saving banks will be obliged to maintain a greater core capital ratio requirement than commercial banks.
"If you are not listed on the stock market you derive a commercial advantage, hence it is logical to require a greater solvency from those that don't do so," Zapatero said.
Last week the government raised the core capital requirement from 6 to 8 percent for banks and said non–listed entities have to raise between 9–10 percent.
Spain is struggling to overcome nearly two years of recession prompted in large part by the collapse of a credit–fueled spending spree and real estate bubble.
Its GDP finally posted modest growth in the first two quarters of 2010, then was flat in the third. The government had said last week it expected the final figure for all of 2010 to be better than its forecast of a 0.3 percent contraction.
The decline is tiny compared to the 3.7 percent drop that Spain's output suffered in 2009.
As Spain's economy has been gradually but tepidly recovering this year, the central bank blamed the big drop of 2009 for the statistical effect that yielded an overall decline for 2010.
"The weak progress in the economy over the course of the year contrasts with higher increases posted in other countries of the euro zone, which shows the greater extent of the crisis in Spain and the impact that the necessary reform process is having on short–term growth rates," the bank's report said.
The bank said household consumption was hit last year by austerity reforms which include a rise in VAT sales tax and a cut in civil servant wages and government spending.
The slightly better–than–expected performance for all of 2010 is due mainly to a rise in exports as a proportion of GDP, the bank said.
Among other reforms, Spain last year overhauled its rigid labor market laws to try to encourage companies to hire, although the jobless rate is still just over 20 percent, a eurozone high.
Associated Press (News - Alert) writer Harold Heckle in Madrid contributed to this report.