Bank of Spain sees slower growth, higher deficit than govt
The Bank of Spain Wednesday forecast slower growth and a higher public deficit for the country than is estimated by the government, which is fending off market fears it will need a financial bailout.
The bank predicted the economy will grow by 0.8 percent in 2011 and 1.5 percent in 2012, well below the government's forecasts of 1.3 percent growth this year and 2.5 percent in 2012.
It forecasts the public deficit will total 6.2 percent of gross domestic product in 2011 and 5.2 percent in 2012. The government predicts the deficit will hit 6.0 percent of output in 2011 and 4.4 percent next year.
The economy is "still immersed in a difficult situation, that requires, on one hand, the continuation of ambitious policies and pressure to correct the fiscal imbalances and on the other hand, progress in structural reforms that favour growth," the bank said in its latest economic bulletin.
Spain is fending off fears in international financial markets that its public deficit is unsustainably high and could prompt the country to follow Greece and Ireland into seeking a multibillion euro EU-IMF bailout.
The government has slashed spending and passed pension reforms to rein in spending. It has also reformed the labour market in an attempt to revive the economy and fight an unemployment rate of just over 20 percent, the highest in the industrialized world.
Last week Prime Minister Jose Luis Rodriguez Zapatero announced, at an EU summit in Brussels, that Spain will introduce a bill that will force the central government to limit total spending as a percentage of GDP.
He also said his government was confident it will complete a pending reform to the nation's collective bargaining system by late April.
The Spanish economy, Europe's fifth largest, contracted by 0.1 percent in 2010 after shrinking 3.7 percent in the previous year following the collapse of a property boom that lasted more than a decade.
Spain along with Greece and Ireland were the only eurozone economies to shrink in 2010.
© 2011 AFP