Spain will not meet deficit targets in 2012 & 2013 : ING

 

Dutch bank ING believes that Spain will not meet it's financial deficit targets for 2012 or 2013, and considers that the gap between income and expenditure of public accounts could be almost 5% of GDP, nearly two points more than expected.

The Bank estimates that by the end of 2012 the fiscal deficit will be 6.1% of GDP, more than the 5.3% forecast by the government, and 4.9% for 2013, a gap of nearly 21,000 million compared with the estimates of the government.

Furthermore, ING does not rule out that the country will need a bailout and will need to ask for help from the European Financial Stability Fund to clean up their financial system.

ING forecasts that the Spanish account imbalances will be largely down to the regional governments being unable to meet deficit targets of 1.5% of GDP, while state revenues will be lower than expected due to a recession in the Spanish economy.

The Bank also predicts that Spain will remain in recession until at least late 2013, with the economy contracting by 0.2% next year, and by 1.3% in 2012 compared to the 1.7% forecast by the Government.

ING concludes that the recession is likely to worsen in the coming quarters, with the construction and real estate sectors remaining to drag the economy down.

Whilst property prices have fallen by an average of 22% since the market crash of 2007, the Bank estimates that prices have still got to fall between 15-20% before the market levels out.