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May 8, 2015

Brussels has improved its growth forecast for Spain

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Brussels has improved its growth forecast for Spain

Brussels has improved its forecast for economic growth in Spain to 2.8% in 2015 and to 2.6% for 2016. Therefore, the forecast GDP growth is in five points more than the European Commission presented in February this year. Meanwhile, the forecasts are less optimistic than those published by the Government of Mariano Rajoy on Thursday: the growth of 2.9% in 2015 and 2016. However, the improvement is less pronounced respect to the unemployment rate, which will be equal to an average of 22.4% in 2015, according to Brussels. Furthermore, the European Commission warned of the risks to meet the state budget deficit in relation to the implementation of the "tax reform in an election year," among other risks of the economic reality of Spain. The European Commission has also revised upwards its forecast for GDP growth in the euro area: around 1.5% this year and 1.9% in 2016.

The European Commission on Tuesday revised its growth forecasts for Spain and increased it to 2.8% of GDP this year (five tenths more than the February estimation) and to 2.6% in 2016 (one tenth more) due to increased employment of population, improving of financial conditions, increasing of confidence and falling of oil prices.

But despite the higher growth rates, Brussels does not expect Spain to fulfill its objective of reducing the public deficit in 2015 (4.5% instead of the expected 4.2%) and 2016 (3.5% instead of 3%). The executive body of the EU predicts that the public debt will continue growing up 100.4% this year and up 101.4% in 2016, while inflation will remain negative in the short term (-0.6% in 2015) thanks to falling of oil prices. In 2016 the inflation rate in Spain, however, will return to positive territory, but remain at a very low 1.1%.

Brussels forecasts are slightly less optimistic than the forecasts of the Government of Mariano Rajoy, who on Thursday announced the forecast GDP growth of 2.9% Spain 2015 and 2016. And in terms of unemployment, the Spanish authorities expect a better rate than that presented by the executive body of the EU, namely 22.1% this year and 19.8% in 2016. The Spanish Finance Minister Cristobal Montoro said that Spain will be able to meet the target of reducing the public deficit. Brussels calculations, however, are less optimistic than those presented by the International Monetary Fund (IMF), which in April raised its forecasts for Spain to 2.5% in 2015 and 2% for 2016. In any case, Spain will be among the major member states of the euro area, which will grow at the most remarkable pace this year, ahead of Germany (1.9%), France (1.1%) and Italy (0.6% ) and will have a rate almost twice higher than the average growth of the countries that use the single currency, the euro (1.5%). Only Ireland (3.6%), Malta (3.6%), Luxembourg (3.4%) and Slovakia (3%) will be able to grow at a rate greater than Spain, while Lithuania will be at the same level of GDP growth.

 

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