Madrid: Spain returned to growth in 2014 after a six-year slump, official data showed Friday, but the recovery is far from being felt as one in five Spaniards is still unemployed.
The eurozone`s fourth-largest expanded by 1.4 percent last year after contracting by 1.2 percent in 2013, according to provisional figures from the National Statistics Office.
It is the first full-year economic growth in Spain since 2008 when a property bubble burst, putting millions of people out of work and pushing the country to the brink of a bail out.
But Spain`s strong tourism and export sectors, as well as improved domestic demand have helped lift output, catapulting the economy to one of the fastest-growing in the eurozone last year, behind Ireland which is estimated to have grown by 4.7 percent and economic powerhouse Germany which grew by 1.5 percent.
Growth accelerated in the fourth quarter to 0.7 percent, its fastest pace since before the protracted downturn, from 0.5 percent in the third quarter as consumer spending picked up.
"The figures show a good evolution. They reveal a creation of wealth and a reduction of unemployment, which is the priority of our economic policy," Deputy Prime Minister Soraya Saenz de Santamaria told a news conference.
Economy Minister Luis de Guindos said Monday the government`s growth forecast for this year could be raised from 2.0 percent to 2.5 percent if oil prices and the euro remained low.
Spain is heavily reliant on energy imports and the government estimates falling oil prices could save the country up to 15 billion euros ($17 billion) this year while a weaker euro makes exports cheaper.
A planned cut in personal and corporate income taxes in 2015 will further help to boost growth, said Raj Badiani, an economist at IHS Global Insight in London.
"Clearly, the near-term outlook is relatively bright," he said.
However, the optimism has not filtered down to a population which was struggling with a jobless rate of 23.7 percent in 2014, although that hasf fallen from 25.7 percent a year ago.
The situation was even more morose for under-25s -- one in five are unemployed.
Although companies have began to create jobs again, analysts say the majority are low-wage, short-term contracts.Another challenge Spain faces is deflation, said Jonathan Loynes, chief European economist at London-based Capital Economics.
Consumer prices in Spain fell by a higher-than-expected 1.5 percent in January, a seventh straight month of declining prices.
Falling prices may sound good for the consumer, but they can trigger a vicious spiral where businesses and households delay purchases, throttling demand and driving companies to lay off workers.
"A deep and protracted bout of deflation could have both economic and political consequences if it both derails the recovery and leads to a further rise in the popularity of the hard-left Podemos party ahead of ... general elections" expected at the end of the year, Loynes said.
Podemos was formed just a year ago but has surged in the opinion polls ahead of a regional and municipal elections in May and the general election.
The statistics office will publish final gross domestic product figures for 2014 at the end of February when it will outline which sectors posted the strongest growth.
The Spanish economy has benefited from an uptick in consumer demand and a recovery in the construction sector, the Bank of Spain said in its latest economic bulletin.
It has also benefited from the arrival of a record 65 million visits from foreign tourists last year, which gave its key tourism sector a boost.
Exports were also up by 5.8 percent during the first 11 months of 2014 over the same year-ago period, according to the economy ministry.
"Spain has gained export market share, which could be a reflection of recent labour market reforms helping to generate improved competitiveness and productivity," said Badiani.