Another year of recession in Spain – says OECD

oecd-logoSpain, with the fourth largest economy in the euro zone, will not come out of recession this year, or next, according to the Organization for Economic Cooperation and Development (OECD).

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.