Spanish government growth forecasts too optimistic: study

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The Spanish government is too optimistic in its growth forecasts for 2011, said a study released Wednesday by Citigroup, which warned of "significantly lower" economic gains than officially predicted.

The socialist government of Jose Luis Rodriguez Zapatero predicts the economy will contract 0.3 percent in 2010 and then expand 1.3 percent in 2011.

Other organisations are more pessimistic.

The Bank of Spain expects a contraction of 0.4 percent this year before a return to growth of 0.8 percent next year while the International Monetary Fund recently revised downwards its growth forecasts for 2011 from 0.9 percent to 0.6 percent.

A study released Monday by BBVA bank predicted Spain's economy would shrink 0.6 percent this year ahead of 0.7 percent growth in 2011.

"We reckon economic growth will be significantly lower in 2011 relative to the official government's forecast of 1.3 percent," the Citigroup study said.

"Growth may go back into negative territory" in the second half of 2010, it warned.

Spain entered its worst recession in decades during the second half of 2008 as the global financial meltdown compounded a crisis in the once-booming property market.

It emerged during the first quarter of this year with tepid growth of 0.1 percent.

The Bank of Spain last Friday forecast growth of 0.2 percent in the second quarter while official figures from the National Statistics Institute are to be released on this coming Friday.

Zapatero on Tuesday said the government expects "the third quarter will not be as good as the second."

© 2010 AFP

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