Government considers cut in 2008 growth estimate
23 November 2007, Madrid - The Spanish government said on Thursday that it was considering lowering its growth target for the economy next year in the wake of the tighter liquidity conditions and market turbulence unleashed by the US subprime mortgage crisis.
23 November 2007
Madrid - The Spanish government said on Thursday that it was considering lowering its growth target for the economy next year in the wake of the tighter liquidity conditions and market turbulence unleashed by the US subprime mortgage crisis.
Appearing before the Senate, the secretary of state for the economy, David Vegara, said the downward risks to the government's initial forecast for GDP growth in 2008 of 3.3 percent made in July had increased in the wake of the credit crunch, which began to make itself clearly felt after the summer. He said the revised figure could be around 3 percent.
"We will carry out a revision that brings this new situation into account, but we believe the impact will be limited, and therefore, we think a figure of around 3 percent remains perfectly achievable," Vegara said. The government revises its economic targets twice a year; in July and December.
In its latest World Economic Outlook, released last month, the International Monetary Fund cut its estimate for Spain's GDP growth for next year to 2.7 percent, down 0.7 points from the forecast the multilateral agency made in July. One of the main risks the IMF identified was a downturn in the Spanish housing market if credit conditions tightened further.
A series of interest-rate hikes by the European Central Bank since the end of 2005 have already caused a massive housing boom in Spain to tail off, while also dampening private consumption, another of the mainstays of well over a decade of uninterrupted strong economic growth in the country.
According to figures released earlier this week by the National Statistics Institute, the economy slowed to an annual 3.8 percent in the third quarter on lower domestic demand. Growth in the second quarter was 4.0 percent, which was down from 4.1 percent at the start of the year. The government is targeting GDP to increase 3.8 percent for full-year 2007.
Domestic demand eased to 4.4 percent from 4.9 percent in the second quarter as investment in construction slowed to 3.5 percent from 4.2 percent, while household spending decelerated to 3.8 percent to 4.7 percent.
Also appearing before the Senate, the secretary of state for finance, Carlos Ocaña, said growth next year would not be far off 3.3 percent, adding that the "pace of activity remains very high."
[Copyright EL PAÍS, SL./ A. SIM 2007]
Subject: Spanish news