Government to “revise” this year’s economic forecast, says Rajoy

Prime Minister Mariano Rajoy on Wednesday said the government plans to “revise” its economic forecasts for this year. Most experts consider the current ones to be unrealistic.

In response to a question in Congress by the leader of the main opposition Socialist Party, Alfredo Pérez Rubalcaba, on the estimates for this year sent to the European Commission (EC) in April of last year, Rajoy said: “The forecasts are not a lottery ticket; they are economic targets that have to be meet, and in fact we’re going to change those forecasts.”

The official target for GDP for this year is for a contraction of 0.5 percent before a predicted return to growth of 1.2 percent in 2014. The EC in February estimated a contraction in GDP for this year of 1.4 percent followed by growth next year of only 0.8 percent.

Brussels is also at odds with the Rajoy administration in its predictions for employment. The Commission expects the average jobless rate in Spain to rise from 25.0 percent at the end of last year to 26.9 percent this year, before easing to 26.6 percent in 2014. The Popular Party administration in Madrid sees it falling to 24.3 percent this year and again to 23.3 percent in 2014.

The pillar of the government’s economic policy has been the reduction of the public deficit through a drastic austerity plan that has included tax hikes and wage cuts for the public sector as well as reneging on an obligation to compensate pensioners for a loss of spending power due to higher-than-forecast inflation. Rubalcaba on Wednesday urged Rajoy to shift the focus of policy more toward growth.

“You have thrown in the towel as regards unemployment, and if you don´t change economic policy we’re heading for disaster,” the Socialist leader said. Rubalcaba also chided Rajoy about his administration’s failure to top up state pensions last year. “The government resorted to a decree to restrict the rights acquired on pensions,” he said.

The government is due to present its revised forecasts to Brussels next month. The revision process is running in parallel to talks with the Commission on relaxing Spain’s deficit-reduction commitments. Currently, Spain is due to bring the deficit back within the EU ceiling of three percent of GDP in 2014, but Brussels predicts the shortfall will widen from 6.7 percent this year to 7.2 percent next year in the absence of further fiscal measures.