According to the latest forecasts from the Organisation for Economic Cooperation and Development (OECD), the Spanish economy will record a contraction of 1.3% in 2012 which will worsen next year to 1.4% as a result of the fiscal consolidation measures and the expected slowdown in the eurozone as a whole. As a result, unemployment will continue to increase, reaching 26.9% in 2013 and will exceed 6 million unemployed. The deficit will also grow, reaching 6.3%.
The Spanish Government’s latest forecasts predict a drop in economic activity of 1.5% this year, 0.5% in 2013, and by 2014, a GDP growth of 1.2%, while the OECD predicts growth of 0.5%, the lowest rate of all member countries except Greece, which will continue in recession in 2014 (-1.3%).
El Economista reported that because of the “deepening recession”, the unemployment rate will rise to 26.9% in 2013, over the 25% estimated by the Government for the end of this year. This record level will lower one tenth in 2014, to 26.8%, again below only Greece (27.2%).
According to data published by the Labour Force Survey (LFS), the unemployment rate stood at 25.02% of the active population in the third quarter, with a total of 5.77 million unemployed. Thus, if the OECD forecasts are correct and the unemployment rate climbs to almost 27% of the workforce, both in 2013 and 2014, then the number of people unemployed will exceed 6 million.
As for the deficit, the OECD estimates that Spain will close 2012 with a deficit of 8.1%, almost two points above the 6.3% target agreed with Brussels. For 2013, the budgetary gap will stand at 6.3%, against the forecast 4.5%, while in 2014 it will be 5.9%, which represents a deviation of more than three percentage points from the target of 2.8% set for the year.
These new deficit projections developed by the OECD also widely exceed those contained in their May issue of the report, when they predicted they would stand at 5.4% in 2012 and 3.3% in 2013.
The OECD acknowledged that Mariano Rajoy’s Government has launched an “ambitious” fiscal consolidation plan which is “appropriate and necessary in order to restore confidence”. However, they stressed that successful deficit reduction will not be enough to achieve the targets due to “weak economic growth.”
However, the Paris-based organisation predicts a recovery in the eurozone in 2014, when it will grow by 1.3%. Finland will lead the expansion, with GDP growth of 2.2%, followed by Germany (1.9%) and France (1.3%). Meanwhile, Portugal is expected to grow by 0.9%, Italy by 0.6%, and Spain by 0.5%, the weakest figure among all OECD countries, except Greece, which will remain in recession (-1.3%).