Spain should achieve public deficit goal this year: study

1st September 2010, Comments 0 comments

Spain should achieve its goal of slashing the public deficit to 9.3 percent of gross domestic product this year, a study by Citigroup said Wednesday.

"The sharp improvement in the budget balance recorded since May suggests the target of a general government budget deficit for year-end of 9.3 percent of GDP is likely to be met," Citigroup said in a research note.

The comment came a day after the finance ministry said the central government deficit, which forms only a part of the overall public shortfall, had shrunk 48 percent in the first seven months of the year to 25.77 billion euros (33.11 billion dollars), or 2.44 percent of GDP, from the same period last year.

The improved figure was attributed to higher tax revenues and a 2.5-percent cut in spending as part of government austerity measures.

The Socialist government in May introduced a 15-billion-euro belt-tightening package to rein in the public deficit from a massive 11.2 percent of gross domestic product in 2009 to 9.3 percent this year, six percent in 2011 and three percent -- the eurozone limit -- by 2013.

Spain slumped into its worst recession in decades at the end of 2008 as the global financial meltdown compounded a crisis in the once-booming property market.

It recovered this year with tepid growth of just 0.1 percent in the first quarter and 0.2 percent in the second.

The government predicts the economy will contract 0.3 percent in 2010 and then expand 1.3 percent in 2011.

But other organisations, such as the Bank of Spain and the International Monetary Fund, are far more pessimistic, raising doubts over the government's ability to rein in the public deficit.

Citigroup warned last month that growth in 2011 would be "significantly lower" that that forecast by the government.

© 2010 AFP

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