Spain's economic recovery remained fragile at the start of the year, despite a pick up in exports and more people coming to its beaches, and doubts persist over the country's ability to grow fast enough to reduce its debt burden.

In a monthly report the Bank of Spain said the economy would grow by 0.2 per cent in the first quarter of the year on a quarterly basis, the same as the last three months of 2010.

Spain must assure markets it is capable of stimulating a weak economy to grow at a decent rate to help meet its tough deficit forecasts for the year and avoid the fate of other struggling economies. But first quarter growth was far from robust, chiming with data showing a fall in industrial output in March on weak domestic demand.

The central bank, which forecasts 0.8 per cent growth this year, said the 2011 deficit target of 6 per cent of GDP will be met. It also said Spain had further decoupled from other weak euro zone states such as Ireland, Greece and Portugal, in the first quarter.

Spain already has the highest unemployment rate in the European Union at 21.3 per cent in the first quarter and analysts retained doubts over the economy's path.

The quarterly growth rate estimated by the bank is in line with the consensus forecast for the official data for the first three months of the year, due on May 13th.

Tourism had also helped the economy grow in the first quarter, the central bank said, boosted by instability in north Africa and the Middle East that had forced people to think of alternative destinations for their holidays.

Indeed Ontiveros also estimated that export growth would decline this year, leaving the country more dependent on a pick-up in tourists.

The government reported that tourist spending increased by 6.8 per cent year-on-year in February.

The central bank also said that house prices needed to fall further, and that necessary trend had not been helped by people bringing house purchases forward before tax benefits governing house ownership changed at the end of the year.

The Bank also said the government, unions and business groups must reach an agreement over changes to collective wage bargaining, which could threaten to push inflation higher.

"Such clauses feed the generation of second round effects, that tend to complicate any pick-up in productivity and job creation necessary for a more solid recovery," the Bank of Spain said.

Reuters