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Spain 'facing challenges'

MADRID: Spanish Prime Minister Mariano Rajoy warned yesterday of a "very tough" year ahead for the recession-struck economy but said he hoped for an improvement in the second half of 2013.

"We still have a very tough year ahead, especially in the first half, and we have to persevere in the reforms we have embarked on," Rajoy told a news conference.

"The economy will continue in recession for some time although we hope it will start to improve in the second half of the year ahead."

The Spanish leader spoke to the media after the last cabinet meeting of 2012, a year of sweeping austerity measures, towering unemployment and recession that have sparked mass demonstrations.

Rajoy«s right-leaning government has approved a 2013 budget with 39 billion euros ($51bn) in austerity measures as it seeks to slash the public deficit to three per cent of economic output by 2014 from 9.4pc last year.

Rajoy defended his economic policy. "Although we cannot all see it, this policy is already bearing fruit," Rajoy said, claiming results in the economy, improving confidence and recognition by Spain's euro zone allies and the international financial markets.

Spain's gross domestic product, its total economic output, fell by 0.3pc in the third quarter of the year, according to official data.

The government is tipping an economic slump of 1.5pc this year.

Meanwhile, foreign investors put more money into Spain in October than they took out, marking the second month running the country has benefited from an influx of capital.

Spain registered capital inflow of 12bn euros in October, the Bank of Spain said.

The figure, which excludes central bank operations, was lower than the 31bn euros of inflow in September.

The figures are more evidence of the success of European Central Bank President Mario Draghi's bond-buying plan for struggling euro zone governments, announced in September, in alleviating investor concerns about Spain.

Before September's inflows, Spain had registered 14 consecutive months of outflows.



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