Bank Of Spain Outlook

Bank of Spain Sees Lower GDP, Bigger Budget Gap Than Government

By Emma Ross-Thomas
March 30 (Bloomberg) -- Spain’s economy will grow half as much as the government forecasts next year, making the deficit- cutting process slower than the Finance Ministry expects, the Bank of Spain said.
Spain’s gross domestic product will grow 0.8 percent next year, the Bank of Spain said in its monthly bulletin in Madrid today. That compares with a government forecast of 1.8 percent. The budget shortfall will drop to 10.2 percent of GDP this year and 8.9 percent in 2011, the bank said. The government expects a deficit of 9.8 percent this year and 7.5 percent in 2011.
Spain, struggling with the highest unemployment rate in the euro region and the third-largest budget gap, has been in a recession since the second quarter of 2008. The government projects the economy will contract 0.3 percent in 2010, even as it forecasts quarter-on-quarter growth throughout the year.
Hit by the collapse of a debt-fueled construction boom made worse by the global crisis, Spain’s government created one of the biggest stimulus programs in Europe, including tax rebates and public-works projects. That helped push the deficit to 11.2 percent of gross domestic product last year, which it aims to bring within the European Union limit of 3 percent in 2013.
The central bank forecasts unemployment will rise to 19.4 percent this year and 19.7 percent in 2011. That compares with the government’s forecasts of 19 percent this year, and 18.4 percent in 2011.