GDP and unemployed set to rise, predict analysts

7 January 2004

MADRID –  Spain’s Gross Domestic Product (GDP) is expected to rise this year along with the  numbers of unemployed, analysts said Wednesday.

GDP grew by 2.4 percent in 2003  and is expected to rise to 2.5 percent by next  year, according to economists from the private BBVA bank.

The official Government growth forecast was 2.3 percent for last year and 3 percent for next.

BBVA analysts believe that employment will go up this year by slightly more than 2 percent of the working population compared to the 2.6 percent of 2003.

However, they also believe that the unemployment rate will rise from 11.3 to 11.7 percent due to the increase in the working population.

Their study reveals an increase in inflation of 2.5 percent last year and predicted a fall to 2.3 percent in 2004.

They said the rate of growth in the Spanish economy in 2004 will hinge upon international issues.

In spite of this, demand will go down compared to 2003 due to income tax reforms and the end of sliding interest rates.

Their study shows an increase in domestic demand of 3.4 percent last year but this is expected to  fall to 3.1 percent this year.

Their report predicts household spending will fall from 3 to 2.7 percent (official figures forecast an increase from 2.8 to 3.1 percent). Government spending will go down from 3.8 to 3.1 percent, they said. But investment will go up slighty from 3.2 percent in 2003 to 3.5 percent in 2004.

Analysts believe the monetary policy will continue to be “accommodating” in both the USA and the Euro zone in the next few months and predict the European Central Bank will increase interest rates in the last quarter.

Finally, BBVA experts agree that the euro will stabilise itself around USD 1.20 in the short term, and that the recuperation of the dollar will depend on a “change of attitude” toward the US economy.

[Copyright EFE with Expatica]

Subject: Spanish economic news