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Spain to miss deficit, debt goals in 2012, 2013 - IMF

Source: Reuters - Mon 16th Jul 2012
Spain to miss deficit, debt goals in 2012, 2013 - IMF

Spain will miss its deficit and debt targets this year and next, the IMF said on Monday, though noted the forecasts do not take in to account the €65-billion austerity package announced last week.

The IMF Fiscal monitor report said Spain's deficit will reach 7% of GDP in 2012 and 5.9% in 2013.

The country's debt would reach 90.3% of economic output in 2012 and 96.5% in 2013, the IMF said, although this figure could come down sharply if and once the direct recapitalisation of Spanish banks came into force.

The forecasts compare to EU-agreed goals of a deficit of 6.3% of GDP in 2012 and 4.5% in 2013 and debt forecasts of 79.8% of output in 2012 and 82.3% in 2013.

The government's debt-to-GDP forecasts are set to be adjusted to take into account a recent upwards revision of the deficit over the next 3 years as well as a bank recapitalisation for which Spain requested EU aid in June.

"Revenue underperformance due to the recession and higher spending pressures from unemployment insurance costs, social security outlays and interest payments were expected to push the deficit close to 7% of GDP this year before the announcement of new measures on July 11," the report says.

Spain slipped in to recession for the second time since 2009 in Q1 and its unemployment rate is more than double the EU average, while its high public deficit has prompted a slew of spending cuts and tax hikes.

The government's most recent reforms will slash €56.4 billion from the public shortfall in the next two and a half years, leaving a gap to be filled by taxes on energy.

Around €13.5 billion euros would be obtained in 2012 and €22.9 billion in 2013, representing around 1.3 of GDP % and 2.3% of GDP respectively.

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