BBVA Revises Forecast for Spanish Economy
August 9th, 2012
The Spanish economy will shrink by 1.4% both in 2012 and in 2013 because of persistent financial strains and lack of concrete solutions at the EU level, says the BBVA. They further predict that the unemployment rate will touch 26% next year and are calling for Europe to reduce the Spanish risk premium.
This is reflected in BBVA Research’s latest issue of ‘Situation Spain’, which notes that the Spanish economy will remain in recession next year.
The research service of the organisation headed by Francisco Gonzalez have revised their latest forecast, pointing to a contraction of 1.3% this year, but that it would turn into a positive growth of 0.6% in 2013.
The Government forecasts an economic downturn of 0.5% next year, with an unemployment rate of 24%, and a return to growth in 2014. Currently, the unemployment rate is at 24.63%.
For the third quarter of this year, the BBVA forecast that GDP will contract by 0.4%, a decline similar to that of the second quarter, and which would amount to four consecutive quarters of declines for the Spanish economy.
BBVA Research argues their revision in the growth prospects for 2013 is down to the “lack of certainty” on policies to solve the problems of solvency and liquidity at European level, as well as the risk of rupture of the euro.
“As a result of this scenario, Europe will present weak economic growth during 2012 and 2013, which will not boost or support the Spanish economy,” they explained.
El Mundo reported that the latest issue of ‘Situation Spain’, dated 7th August, also warns that employment will continue to decline in the second half of 2012 and in 2013, causing a rise in the unemployment rate to about 26% next year, despite the expected fall in the labour force.
The BBVA also indicated that European institutions must take a “quantum leap at the corporate level” in order to expedite the solution to the debt crisis.
“European institutions must support the policies implemented in Spain using all available mechanisms as efficiently as possible to reduce their risk premium and ensure consistency with the fundamentals of the Spanish economy,” they explained.
The BBVA also expects that the program of payments to suppliers will continue to have a “positive” impact on spending in the coming months which, together with the reduction in social security contributions paid by employers, will increase the competitiveness of Spanish companies against their outside competitors.
On the road to fiscal consolidation, BBVA Research stressed the “unavoidable sacrifices” made in order to contain the deficit, and highlighted the Government’s action to provide “credibility” to the budget deficit target for this year, of 6.3% of GDP.
On the global economy, BBVA Research predicts it will grow by around 3.5% this year and 2013, driven by the advance of emerging economies.
- BBVA Warns of a New Spanish Economic Recession
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- Spain Economy Will Fall 1.4% This Year