Spain deficit target still at risk: Barclays analysts

29th November 2011, Comments 0 comments

Spain's belt-tightening is helping whip its deficit into shape but the country may still miss its key target for this year, Barclays bank analysts warned in a study on Tuesday.

In a dose of good news for the battered economy, official data released on Monday showed that Spain's regions closed in on 2011 deficit targets and even logged a slight third-quarter surplus of 192 million euros ($255 million).

The 17 powerful regions -- whose spending is a major concern of markets -- curbed their combined deficit to 1.19 percent of Spanish gross domestic product (GDP) in the first nine months of 2011, Finance Minister Elena Salgado said.

"Overall we consider the surplus delivered by the regions in the third quarter positive news," Barclays said in a study.

"We will have to continue monitoring the deficit through year-end and beyond," it added, however.

"It is likely that the 2011 deficit will be in the range of 6.0-7.0 percent of GDP" in 2011, Barclays said. "Our projection of 6.5 percent of GDP remains unchanged," above the Spanish government's target of 6.0 percent.

Separate figures released by the economy ministry on Tuesday showed the central government's budget deficit, which excludes the regions, reached 3.7 percent of GDP in the first 10 months of the year, at 40.65 billion euros.

This was 17 percent lower than during the same period in 2010, said the ministry, which aims for an overall central government deficit of 4.8 percent this year.

"Overall it is too early to say whether the central government will compensate for deviations in sub-central government deficits, but the risks still point to a potential overall fiscal slippage," Barclays said.

Spain's central bank and the European Commission have warned that Spain will miss its target of trimming its overall national deficit from 9.3 percent of GDP last year to 6.0 percent this year and 4.4 percent in 2012.

The Popular Party which won the November 20 general election said its leader Mariano Rajoy will meet with regional leaders on Thursday, and the government will take office on December 22.

© 2011 AFP

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