Spain exits recession but risk of double dip remains
SPAIN'S economic growth accelerated in the second quarter, the Bank of Spain said, despite government austerity measures.
Gross domestic product rose 0.2pc from the previous quarter, when it increased 0.1pc, bringing the recession that began in early 2008 technically to a close. From a year earlier, the economy contracted an estimated 0.2pc, the Central Bank said.
Car-buying incentives boosted spending in the quarter, while an increase in sales tax in July encouraged consumers to bring forward purchases, the bank said.
Household consumption grew around 0.7pc from April to June, it estimated.
But the deepest austerity measures in at least three decades, tax increases and the withdrawal of stimulus including public works programmes, threaten to undermine the recovery.
The unemployment rate rose to a decade-high of 20.1pc in the second quarter.
"As these effects come to an end, the pace of consumption growth could ease, in the context of a decline in disposable income," as wage growth slows and government stimulus measures are wound back, the Bank of Spain said.
"The economy could slip back into a technical recession by the end of 2010 or early 2011," said Raj Badiani, an economist at IHS Global Insight in London.