Spanish economy grew 0.2% in Q4, 2010

The Spanish Economy is Showing Signs of Revival

The Spanish Economy is Showing Signs of Revival

Boosted by exports, the Spanish economy recorded a 0.2% growth in the fourth quarter of 2010, official figures show.

However, the economy has contracted by 0.1% in the whole of 2010, the National Statistics Institute estimated. Analysts attributed the growth in the fourth quarter to increase in export of goods.

In a move to regain investor confidence, the Spanish government had approved an austerity budget, outlining broad national spending cuts.

Unicredit analyst Tullia Bucco said: “I think growth was driven by a high contribution from both final domestic demand and exports”.

The Spanish government has been under pressure from the international investors and the EU to reduce its staggering budget deficit.

To counter the eurozone’s debt problems, EU members have been trying to bring down the budget deficit to 3% of gross domestic product of member countries.

The Spanish government reached an agreement with the country’s unions to reform the pension system. As part of the process, retirement age was increased to 67 years from the existing 65 years, to be implemented from 2013 and one of the highest in the eurozone.

The government approved an overall spending cut of 7.7%, including a wage reduction of 5% for public sector employees.

The government is also hoping to raise another €170 billion – €200 billion by increasing the personal income tax of people earning more than €120,000 per annum.

Spain has committed to reduce its budget deficit to 6% by 2011 from 11.1% of GDP, recorded in 2009.

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