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Spain sees no big hit from wider slowdown

Source: Reuters - Thu 8th Sep 2011

Spain's economy may suffer slight impact at most from the slowdown in other countries, and the government is not revising its growth outlook for this year, Economy Minister Elena Salgado said on Thursday.

Salgado told a news conference the country's nominal GDP is on target, and that the government was sure to fulfil its pledge to hold the public deficit to 6% of GDP this year.

Spain's commitment to slashing its deficit is part of euro zone efforts to emerge from a prolonged debt crisis that has seen government borrowing costs soar.

Salgado kept to the government's outlook for 1.3% economic expansion this year although noting that European economic data had been disappointing.

"We are not going to revise our growth outlook... but we can't rule out that this general slowdown will affect us slightly. I insist, slightly," Salgado said.

Spain's economy expanded 0.7% in Q2, compared with the same quarter last year, and manufacturing data for the beginning of the third quarter has been lacklustre.


Salgado also reported that Spain's 17 autonomous regions posted a deficit equivalent to 1.2% of GDP in the first half of the year, up from 0.46% in the first quarter.

The closely watched figure is not directly comparable with a government regional deficit target of 1.3% of GDP for this year due to different accounting standards.

Many economists are concerned that a lack of fiscal discipline at a regional level could derail Spain's deficit reduction plans.

"We need to be very prudent analysing these figures because the autonomous regions are not used to quarterly reporting," Salgado said.

Of the 17 regions, 5 reported a budget surplus or a deficit compatible with the target for 2011, but other regions need to implement as soon as possible measures to ensure they comply with objectives, Salgado said.

The government has called a meeting for next week with each of the regions that did not comply with an individual deficit target of 0.75% of GDP, she added.

"Today we have called a meeting with the regions which have not complied with the target so that next week each of them individually explain how they are implementing the measures," she said.

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