Spain Revises Up 2012 Deficit Amid Data-Change Request: Economy
The Spanish government revised up the first estimate of its 2012 budget deficit after the European Union requested that it changes the way it computes tax claims.
The budget shortfall excluding aid to the banking sector was 6.98 percent of gross domestic product last year, higher than the 6.74 percent predicted on Feb. 28, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid today. That compares with 8.96 percent in 2011.
“This isn’t surprising given they announced in January that the budget deficit would be below 7 percent of GDP before they even had sufficiently reliable data,” Ricardo Santos, an economist at BNP Paribas in London, said by phone. “There are questions about Spain’s exact figures, which is why it’ll have to wait until Eurostat data are released while Portugal is being given more time already to cut its deficit.”
Spain is seeking an extension from other euro-region governments to reorder its public finances as Prime Minister Mariano Rajoy says output may shrink more in 2013 than the 0.5 percent he initially predicted. That’s a third of the contraction forecast by the International Monetary Fund. Spain is due to submit budget plans through 2014 to the European Commission next month.
The central government’s deficit for the first two months of the year widened to 2.22 percent of GDP from 1.95 percent last year, according to data calculated using the new methodology, Curras said.
The euro weakened to less than $1.28 today for the first time since Nov. 21. The single currency dropped 0.7 percent and traded at $1.2777 at 12:41 p.m. in Madrid. The Stoxx Europe 600 Index declined 0.8 percent to 291.45.
Economic confidence in the euro area fell more than economists forecast in March, adding to signs that the recession in the 17-nation region continued into the first quarter.
In the U.K., disposable income fell 0.1 percent in the fourth quarter from the previous three months as the economy contracted 0.3 percent, the Office for National Statistics said today in London. The country’s lenders must raise at least 25 billion pounds ($38 billion) to plug a shortfall in capital and cover higher estimates for expected loan losses, potential fines and better risk calculations, the Bank of England said.
In the Asia-Pacific region, Vietnam’s economic growth slowed in the first quarter, while consumer confidence in South Korea climbed, reports showed today. In the U.S., data on mortgage applications and pending home sales are due.
Eurostat, the EU statistics office, told Spain to compute tax refunds in its national accounting as and when they are claimed instead of waiting for the claims to be checked by tax authorities, Curras said. That means Spain must revise its budget-data series that starts in 1995, she said, without commenting on when the figures will be released.
“Bond markets need to know the country’s exact fiscal metrics,” Justin Knight, a London-based rates strategist at UBS AG, said by telephone. “It’s so difficult to tell what the real numbers are. We’ll have to wait for Eurostat’s release.”
The yield on Spain’s 10-year bond rose 12 basis at 12:29 p.m. to 5.05 percent, widening the spread with similar German maturities to 3.77 percentage points. European Central Bank support has shielded Spain from a full bailout since the yield rose to a euro-era high of 7.75 percent last year.
The Budget Ministry delayed tax refunds in the fourth quarter as it intensified controls. Cash-basis data released this month by the national tax agency showed refunds surged 83 percent in January from a year ago after dropping 62 percent in December. Tax refunds declined an average of 7.9 percent in 2012, more than twice as much as in 2011.
“It is a bit of an accounting game,” said Ignacio Conde- Ruiz, a Madrid-based economist who works for the economic research institute Fedea. In the end, the changes come “with a cost for companies because they have to wait for their money.”
The Bank of Spain said yesterday a return to growth in 2014 is possible if the country’s total deficit -- including those of the regions, town halls and the tax-funded pensions and unemployment benefits system -- remains around 6 percent of GDP between 2012 and 2014, excluding European aid for banks last year.
Still, the country is far from stabilizing its debt, the bank said, as the EU’s current deficit limits set for Spain are 4.5 percent of output this year and 2.8 percent in 2014. That compares with actual overspending of 10 percent of GDP last year including bank aid.
The central government’s interest bill surged 15 percent last year to 26 billion euros, while tax receipts slumped 21 percent. The cost of servicing debt represented 30 percent of the taxes collected at the end of December, up from 20 percent a year earlier.
The European Commission forecasts Spain’s debt-to-GDP ratio will rise above the euro region’s average this year for the first time since the single currency was created, after its borrowings jumped 20 percent last year to 84.1 percent of GDP.
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