Spain's economy picked up pace in the fourth quarter, official data showed today, adding to signs that the country is emerging from five years of stop-start recession which destroyed millions of jobs.

The Spanish economy expanded by 0.2% in the fourth quarter of 2013 from the third, accelerating from the previous quarter's growth of 0.1%, the National Statistics Institute said in a report.

The figure were below earlier estimates by the institute and the Bank of Spain that the euro zone's fourth-biggest economy grew by 0.3% in the October-December period.

Spain's economy shrank by 1.2% over the whole of 2013, its fourth annual contraction in five years, as the country struggled with the aftermath of a decade-long property bubble that burst in 2008.

Prime Minister Mariano Rajoy said in his state of the nation address he saw the economy growing 1% this year, up from the current 0.7% forecast, and by 1.5% next year.

He credited his tough economic reforms and austerity policies with pulling Spain back from the precipice of a full-blown bailout, widely feared in mid-2012. 

"Spain was seen as a burden for Europe and now it is seen as a motor," he said.

To reduce Spain's unemployment rate of 26%, one of Europe's highest, Rajoy announced that social security contributions on new hirings would be cut.

Though avoiding a widely feared economic rescue in mid-2012, Spain's government obtained a €41.3 billion rescue loan from the euro zone to save its struggling banks, whose assets had been hammered by plunging property values.

Besides cutting spending to rein in Spain's yawning public deficits, the government reformed the labour market in 2012 by cutting dismissal costs and making it easier to change work conditions.