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Spanish economy set to grow

26 November 2003

MADRID – The Spanish economy is set to grow by 2.3 percent by the end of the year, economists said Wednesday.

The Organisation for Economic Cooperation and Development (OECD) said rate of growth could also rise by 2.9 percent next year and 3.1 percent in 2005.

OECD economists believe domestic demand, improving at an annual rate of over 3 percent for the past 18 months, was the main factor that enabled Spain to outperform its partners in the 12-nation European Union.

Generally other countries can expect a growth rate of no more than 0.5 percent for this year.

The economists suggested the weaknesses in the Spanish economy were mainly due to external factors like a slow economic recovery in the European Union and the high exchange rate for the euro, which impedes exports from Spain and other eurozone countries.

But they warned if there was a “sudden and dramatic” drop in the demand for housing it would have a “markedly negative effect” on the economic outlook, though this is seen as “unlikely”.

They said: “As long as construction does not level off, the growth could be even more sustained than is foreseen at present”.

While the international outlook continues to improve and the euro moderates its rise, Spain’s export sector should benefit accordingly, growing by 4.1 percent this year, 5.2 percent in 2004 and 7.2 percent the year after.

But unemployment, which has long been the weakest part of the Spanish economy, should stay at 11.4 percent – the same figure as the previous year.

The high level of people out of work has been blamed on the rise in the number of immigrants and women entering the labour market.

This has offset the benefits of new job creation schemes and a growing GDP.

However, OECD economists predicted next year, the number of people out of work could fall to 11 per cent and then drop further to 10.6 percent in 2005.

[Copyright EFE with Expatica]

Subject: Spanish news