Fitch slashes Spain growth predictions

Tim Wallace
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UNEMPLOYMENT rose for the fifth consecutive month in Spain, data published yesterday showed, as ratings agency Fitch cut its economic growth forecasts for the country.

However, German unemployment fell to 6.8 per cent, or 2.88m, from 6.9 per cent in November – its lowest level since reunification in 1991, according to the Federal Labour Agency.

Spain’s claimant count rose slightly, increasing by 1,897 to 4.42m, compared with a 59,536 jump in November.

The data “confirmed the deteriorating economic situation in the second half of the year”, said employment minister Engracia Hidalgo.

Meanwhile Fitch cut its economic growth forecasts for the country to zero in 2012, and one per cent in 2013, from forecasts of 0.5 and1.5 per cent.

The agency believes “a resolution of the Eurozone crisis” is vital to boosting Spain’s banks and the wider economy.

However, its 2012 outlook also claims “banks are unlikely to return to the cheap funding costs that were available to them in the past,” and that “an improvement in the real estate sector is unlikely in the short term.”

Economists believe the gap between the countries will continue to grow.

“Labour market conditions will remain markedly healthier in Germany than in most other countries in Europe in the months ahead, especially since key leading indicators have shown stabilisation and even a tentative rebound at the end of 2011,” said IHS Global Insight’s Timo Klein.