Spanish growth revised downwards

SPAIN’S ECONOMIC growth has been weaker over the past two years than previously reported, according to revised data published yesterday, indicating a deeper slump than earlier official estimates and further complicating Madrid’s efforts to bring down its deficit.

Gross domestic product (GDP) growth contracted 0.3 per cent in 2010, compared with an originally reported 0.1 per cent drop in output, while the 0.7 per cent growth registered for last year was revised down to 0.4 per cent, according to the country’s National Statistics Institute.

“If you are starting from a lower nominal GDP base in 2011, you would need stronger growth this year to not affect the deficit,” said Raj Badiani, an economist at IHS Global Insight.

“I don’t expect a formal government response to this in the sense of another layer of austerity, but this presents another obstacle to achieving an already difficult target.”

The revisions underscore the fragility of Spain’s economy, which entered its second recession in three years at the start of 2012, with unemployment well above 20 per cent.

The economy is expected to continue to shrink, with government estimates forecasting a drop in output of 1.7 per cent over 2012.

Mariano Rajoy’s government will this week raise Spain’s sales tax from 18 per cent to 21 per cent in an effort to bolster tax revenue.

Finance minister Luis de Guindos said in a newspaper interview yesterday that he did not expect the recession would prevent the government from meeting its tax revenue targets. – Copyright The Financial Times Limited 2012