Spain's economic outlook improving, says Moody's ratings agency

A picture of a construction worker in Spain Spain's construction industry was hit severely by the recession when the property bubble burst

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Ratings agency Moody's has raised its outlook for Spain's economy from "negative" to "stable".

Moody's said there had been a real improvement in the economy and government finances.

Last week, the Standard and Poor's ratings firms also raised its outlook for Spain on signs of economic improvement.

Debt-laden Spain has emerged from a two-year recession, with export growth and companies becoming more confident.

But unemployment remains high, at 26%, and economic growth is expected to be shallow.

Nevertheless, Moody's said: "The external accounts continue to improve, the situation in the labour market has stabilised and the private non-financial sector continues to deleverage."

Moody's left the overall rating for Spanish debt unchanged at Baa3 - just above junk-bond level - but the change in the outlook reduced the likelihood of another downgrade as the country works to rebound from its financial crisis.

"The external accounts continue to perform better than expected, with Spain among the few EU countries to see its export market share increase over the recent past," Moody's said.

The firm said that it "expects the strong export performance to continue, as competitiveness is supported by very low wage and price increases."

Another key change is the government's increasing access to private capital markets, Moody's said.

Last week, S&P raised its outlook from negative to stable, and re-affirmed its BBB- long-term sovereign credit rating.

Spain's economy grew 0.1% in the July-to-September period, after contracting for the previous nine quarters - officially lifting it out of recession.

Prime Minister Mariano Rajoy's government is hoping economic growth will help reduce Spain's spiralling public debt, currently 943bn euros (£792.5bn; $1.3 trillion), or more than 92% of the country's entire gross domestic product (GDP).

The country's banks, which received 41bn euros of EU bailout funding in 2012, have been gradually reducing their borrowings from the European Central Bank over the last year.

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