Spain shows fastest growth in six years, central bank says

Spain's economy grew at the fastest rate in six years in the first quarter of 2014 as it pulled out of a long, job-destroying downturn, the central bank said in a preliminary estimate Thursday.

The eurozone's fourth-largest economy expanded by 0.4 percent on a quarterly basis, the Bank of Spain said in a monthly report, citing initial data.

It was the sharpest quarterly growth rate since the first quarter of 2008 when a decade-long property bubble imploded, tipping the nation into a double-dip recession that wiped out millions of jobs and flooded the nation in debt.

"In the first quarter of 2014, the Spanish economy continued on a path of gradual recovery in the context of increasing normalisation on the financial markets and a gradual consolidation of the labour market," the central bank said.

On an annual basis, the Spanish economy grew 0.5 percent in the first quarter, the bank estimated, the first year-on-year expansion in more than two years.

Spain emerged gingerly from a two-year downturn in mid-2013 but still suffers from an unemployment rate of nearly 26 percent.

The country managed to avoid an international bailout in mid-2012, a risk that haunted financial markets as the nation's debt soared.

Investors appeared to take heart from the European Central Bank's vow in late 2012 to come to the rescue of stricken eurozone members if needed.

- Exit door from crisis -

Prime Minister Mariano Rajoy's austerity measures and labour market reforms 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 ($7.7 billion) on the bond market Thursday with the benchmark 10-year yield sliding to 3.059 percent from 3.291 percent on April 3.

Economy Minister Luis de Guindos said Wednesday he expected the economy to grow by an average of 1.5 percent 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 Thursday showed the unemployment rate in the final quarter of 2013 stood at 25.73 percent.

"A country with an unemployment rate of 26 percent is starting at a terrifying level," de Guindos said.

The Bank of Spain is predicting an unemployment rate still at 25 percent in 2014 and 23.8 percent in 2015.

It expects the economy to grow by 1.2 percent in 2014 and 1.7 percent 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.