BRUSSELS: Spain will have to approve big additional savings this year and next if it is to meet its ambitious deficit reduction targets as the Spanish economy will be in recession in 2012 and 2013, forecasts from the European Commission showed on Friday.
In its twice-yearly economic outlook for the 27-nation European Union, the EU's executive said Spain will have a budget deficit of 6.4 percent of gross domestic product in 2012 and 6.3 percent in 2013, unless policies change.
Spain has vowed to bring the budget shortfall down to 5.3 percent this year from 8.5 percent in 2011 and, unless EU finance ministers give it more time, to reduce it to 3 percent in 2013 if it wants to avoid financial sanctions.
"Whereas the (5.3 percent) target of the central government should be within reach, deviations are projected at this stage for regional governments," the Commission said.
"This reflects the standard no-policy-change assumption and the fact that not all consolidation measures at regional level for 2012 have been specified yet," it said.
"Moreover, the social security system is projected to record a deficit again this year in line with a deteriorating labour market outlook," the forecast said.
The Commission revised sharply down its economic growth forecast for Spain to a recession of 1.8 percent this year from a 1.0 percent contraction forecast in February.
The Spanish government has forecast the economy will grow 0.2 percent in 2013, but the Commission forecast it would still contract by a further 0.3 percent next year.
EURO ZONE TO GROW IN 2013
The Commission projected that Spain will be the only euro zone country to be in recession next year and the euro zone economy as a whole is to expand by 1 percent, after a 0.3 percent recession forecast for 2012.
"A recovery is in sight, but the economic situation remains fragile, with still large disparities across Member States," EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.
indiatimes.com
In its twice-yearly economic outlook for the 27-nation European Union, the EU's executive said Spain will have a budget deficit of 6.4 percent of gross domestic product in 2012 and 6.3 percent in 2013, unless policies change.
Spain has vowed to bring the budget shortfall down to 5.3 percent this year from 8.5 percent in 2011 and, unless EU finance ministers give it more time, to reduce it to 3 percent in 2013 if it wants to avoid financial sanctions.
"Whereas the (5.3 percent) target of the central government should be within reach, deviations are projected at this stage for regional governments," the Commission said.
"This reflects the standard no-policy-change assumption and the fact that not all consolidation measures at regional level for 2012 have been specified yet," it said.
"Moreover, the social security system is projected to record a deficit again this year in line with a deteriorating labour market outlook," the forecast said.
The Commission revised sharply down its economic growth forecast for Spain to a recession of 1.8 percent this year from a 1.0 percent contraction forecast in February.
The Spanish government has forecast the economy will grow 0.2 percent in 2013, but the Commission forecast it would still contract by a further 0.3 percent next year.
EURO ZONE TO GROW IN 2013
The Commission projected that Spain will be the only euro zone country to be in recession next year and the euro zone economy as a whole is to expand by 1 percent, after a 0.3 percent recession forecast for 2012.
"A recovery is in sight, but the economic situation remains fragile, with still large disparities across Member States," EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.
indiatimes.com
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