OECD slashes Spanish GDP forecast

7 December 2007

MADRID – The OECD said yesterday it was cutting its estimate for economic growth in Spain next year as a massive housing boom starts to peter out.

The Organisation for Economic Cooperation and Development is now predicting that Spain’s GDP will decelerate to 2.5 percent next year from 3.8 percent. The OECD had earlier estimated 2008 GDP growth at 2.7 percent.

The government has set a growth target for 3.3 percent for next year but could revise that figure downward in the wake of the financial market turbulence and a tighter liquidity scenario, sparked by the US subprime mortgage crisis.

The OECD is also expecting a slowdown in job creation and higher borrowing costs to take its toll on household spending. "Private consumption may decelerate, reflecting lower employment gains and tighter credit conditions," the OECD said in its latest global Economic Outlook report.

That, combined with the slowdown in residential construction, will see domestic demand slide to 2.4 percent in 2009 from 4.3 percent this year, partly offset by a less negative contribution from the foreign sector.

[Copyright EL PAÍS, SL. 2007]

Subject: Spanish news