Spain’s GDP will contract 0.8% in 2013 following a 1.6% contraction in 2012, the OECD said in a report released yesterday. This is in sharp contrast to numbers from the International Monetary Fund (IMF) which forecast 0.1% growth in 2013 and 1.8% contraction in 2012.
In March Prime Minister Mariano Rajoy announced that Spain was unlikely to meet it’s 2012 deficit target and as a result Spain’s borrowing costs have been steadily increasing and are fast approaching 7%, the level that marked the beginning of the end for Greece, Ireland and Portugal.
“A further increase in the risk premium on yields of Spanish government bonds would raise private-sector funding costs and deepen the recession,” the report said.
The report goes on to predict that private consumption will contract 1.8% in 2013 and government consumption by 4.5%, partly due to the conservative governments austerity measures.
With unemployment already at record levels (24.4%), and following Rajoy’s comments that it would get worse this year, the report predicts unemployment will rise to 25.3%.
Overall, the report suggests that Spain will miss it’s deficit target of 5.3% of GDP by 0.1 point and will miss it’s 2013 target of 3% by0.3 percentage points. The total national debt will rise to 81.1% of GDP this year and rise to 84.1% in 2013, the report said.
In 2011 the deficit stood at 68.5% of GDP.