Spain has touted a brighter economic outlook as it emerges slowly from a job-wrecking recession, but with an unemployment rate stuck above 20 per cent until 2016.
Prime Minister Mariano Rajoy’s government raised its forecasts for economic growth and deficit-cutting efforts, but tipped only a gradual improvement in the 26-per-cent jobless rate.
The growing optimism in Madrid coincided with fresh data showing the economy grew at a quarterly rate of 0.4 per cent in the first quarter of this year, the fastest since a 2008 property crash tipped the nation into a double-dip recession.
Spain, the eurozone’s fourth-largest economy, emerged from a two-year downturn in mid-2013 and has since reported signs of a gathering, yet modest, recovery.
“We have overcome the recession and recovered the economy’s competitiveness,” Deputy Prime Minister Soraya Saenz de Santamaria told a news conference after a cabinet meeting.
“Spain is growing at the fastest pace in six years.”
The conservative government raised its official economic growth target to 1.2 per cent this year from 0.7 per cent previously. For 2015, the target was raised to 1.8 per cent from 1.2 per cent.
Despite struggling to meet past targets to cut its public deficit, the government said it now expected to trim the shortfall to the equivalent of 5.5 per cent of economic output in 2014, compared to a previous target of 5.8 per cent.
But the outlook for the labour market was relatively grim, with a jobless rate of 24.9 per cent in 2014 and 23.3 per cent in 2015, only dipping below 20 per cent in 2017.
The unemployment rate climbed to 25.93 per cent in the first three months of 2014, up from 25.73 per cent in the previous quarter, official data show.
With unemployment high and incomes under stress, sluggish demand within Spain is simultaneously depressing the price of goods and services, raising fears of a deflationary spiral.