Spain shows more optimism over state of economy

MADRID Wed Jan 15, 2014 9:22am EST

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MADRID Jan 15 (Reuters) - Spain showed more optimism over the state of its economy as top officials said on Wednesday it had likely contracted less than expected in 2013 while growth forecasts for this year could be revised up, both by the government and international bodies.

Deputy Economy Minister Fernando Jimenez Latorre said at a news conference that the country's Gross Domestic Product was thought to have dropped by 1.2 percent last year compared to a 1.3 percent contraction initially foreseen.

He also said the growth target of 0.7 percent for 2014 could be reviewed on the upside.

The country tentatively emerged from recession in the third quarter and foreign investors have started to return, eagerly buying Spanish debt and stocks in recent weeks.

The symbol of this turnaround, bailed-out lender Bankia made its comeback on international funding markets last week and the state, which owns a 68 percent stake in the bank is now mulling selling a chunk of it to start recouping its money under favourable market conditions.

Spain's economy is forecast to grow in 2014 even though domestic consumption is still shaky and unemployment is still running at 25 percent.

Nonetheless, a stronger economic recovery, the correction of imbalances in the country and a sounder financial system should now logically lead ratings agencies to raise their ratings on Spain, Economy Minister Luis de Guindos told a investment conference in Madrid.

Trade Secretary Jaime Garcia Legaz had said earlier he was optimistic the International Monetary Fund would revise up its own growth forecast soon.

The IMF currently foresees a 0.2 percent economic expansion in Spain this year. (Reporting by Julien Toyer and Andres Gonzalez; Editing by Louise Heavens)

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