The International Monetary Fund on Tuesday cut its growth forecast for Spain for next year as it warned of a "dangerous new phase" in global activity.
In its latest World Economic Outlook report, the IMF said it expects Spain's GDP growth to come in at 1.1 percent in 2012. That represented a cut of 0.5 points from its previous estimate. The agency maintained its prediction for growth for this year of 0.8 percent.
Both figures are well below the government's forecasts of a rise in GDP of 1.3 percent this year and 2.3 percent in 2012.
In an interview with Spanish commercial television station Antena 3 on Tuesday, Spanish Economy Minister Elena Salgado said the government is sticking to its forecasts, although she acknowledged it was "possible" the latest figures on the economy do not coincide with those available when the estimates were drawn up. While Spain is emerging from the crisis, it is doing so more "slowly" than the government would like, she added.
The IMF now expects the global economy to grow 4.0 percent this year and the next, 0.3 and 0.5 points less than in its previous forecast. It also lowered its estimates for the United States, Germany and France, while the euro zone is now expected to grow 1.6 and 1.1 percent this year and the next, 0.4 and 0.6 points less than previously estimated.
"The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing," the IMF said in its summary of the report. The Fund also expects the outlook for the Spanish labor market to remain bleak. Average unemployment is forecast to rise to 20.7 percent this year from 20.1 percent last year before easing somewhat to 19.7 percent next year.
Despite the IMF's more pessimistic growth forecasts, Salgado insisted the government would meet its deficit-reduction target for this year of 6 percent of GDP, although she acknowledged the regions - which posted a shortfall in their books of 1.2 percent of GDP to June, compared with their goal for the full year of 1.3 percent - needed to do more.
"The deficit target is non-negotiable and the regions that are having problems are working to overcome them so that the deficit can be met," Salgado said.
The IMF said it expects Spain to meet its deficit forecast for this year and improved its estimate from 5.7 percent of GDP to 5.2 percent for next year when the government is hoping to reduce the shortfall to 4.4 percent. However, IMF adviser Jörg Decressin said from 2013 onwards Spain would need additional measures to achieve its targets.