Experts slash Spain's growth forecasts for next year

The panel of public and private institutions consulted by leading Spanish think-tank Funcas expects the stagnation of economic activity in Spain, initiated in the third quarter of this year, will extend itself into 2012 on growing problems with unemployment, a lack of credit and enhanced uncertainty.

The panel cut its forecast for economic growth for 2012 to only 0.2 percent from 1.0 percent, with five experts predicting negative growth. Unemployment is expected to rise to an average of 22.2 percent of the workforce from 21.3 percent this year.

The panel also believes the government will fail to reach its targets for cutting the public deficit. Experts see the shortfall for this year at 6.8 percent of GDP, 0.8 percentage points above the administration's goal and at 4.9 percent next year, compared with a target of 4.4 percent.

The most positive forecast of 1.0 percent growth was made by BBVA, while the most pessimistic was by Funcas, which predicts a contraction of 0.5 percent. Before the summer, the panel estimated GDP would grow 1.5 percent in 2012.