Solbes in oil prices warning

28 September 2004

MADRID – The Spanish government’s forecasts for economic growth could be affected by the soaring oil price which would “without doubt” have an impact on the forecast for inflation, Economy Minister Pedro Solbes said Tuesday.

Speaking to reporters at a news conference coinciding with the presentation of the 2005 draft budget to the lower house, Solbes said it was “possible” that higher oil prices might have repercussions on economic growth forecasts.

He noted, however, the “favourable impact” of other factors such as low interest rates and eurozone economic growth.

Solbes predicted earlier that Spanish gross domestic product was expected to grow 3 percent in 2005 compared to the 2.8 percent forecast for this year, while domestic demand was expected to slow to a 3.4-percent increase from 3.5 percent this year.

Presenting the 2005 budget,  Solbes said the budget was based on three pillars of stable spending, increasing productivity and the quality of Spanish products.

He said the Socialist government’s aim was to improve the situation for Spaniards through raising productivity, employment levels and competitiveness.

Stability in budget spending was an “indispensable” part of the economic focus of the country, added the minister.

Solbes said it would rationalise spending and produce an economic environment which would bring investment and innovation.

He also promised to stop debts from being transferred to future generations.

Stimulating productivity was also important because it allowed salaries and employment levels to rise, said the minister.

This would also help improve competitiveness and cut inflation.

To stimulate productivity, the government wanted to introduce more competitiveness in the markets for goods and services.

This could be achieved by liberalizing these sectors, especially commerce, transport, the postal service, professional services, the housing market and new technology.

Solbes said the Socialists also wanted to stimulate productivity by reforming the financial markets, particularly relating to mortgage sales, after a period of dialogue with companies and unions involved. 

The government is also to boost research and development by supporting company training in this sector. 

Solbes predicted a budget surplus of 0.1 percent of Spain’s GNP in 2005.

This figure would rise to 0.2 percent of GNP in 2006 and 0.4 percent in 2007.

Total budget spending would rise by 6.2 percent this year to 124 billion.

Solbes said just over 50 percent of the budget will go towards social spending such as pensions and unemployment payments.

Government spending on housing will rise by 32.5 percent and funding research and development will rise by 25.4 percent.
 
Economic infrastructure and education are also to get more cash.
 
[Copyright Expatica with EFE]

Subject: Spanish news