New forecast says Spanish dip will deepen further this year

Ben Southwood
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SPAIN will have to brace itself for yet further worsening in its economic climate this year, the Bank of Spain warned yesterday.

On top of last year’s 1.4 per cent slide in economic output, the economy will shrink 1.5 per cent this year, the central bank said.

This goes sharply against the government’s own expectation that GDP will fall only 0.5 per cent through 2013 as a whole, but is broadly in line with what independent economists are forecasting for the stricken Eurozone member.

“Private agents remain immersed in a process of deleveraging, families have seen a notable shrinking of income, public accounts continue on their path toward sustainability, and residential investment has not yet hit bottom,” the bank said, explaining why its prediction for the year was so gloomy.

Spain, under Prime Minister Mariano Rajoy, has brought its budget deficit down from close to nine per cent in 2011 to 6.7 per cent last year, and hopes to reach the EU’s three per cent ceiling in 2016.