Spain Boosts 2016 Outlook to 2.9% as Fine Ruling Looms

  • EU may impose penalty after nation violated spending limits
  • Country in political limbo after two elections in six months

The Spanish economy is set to grow at a faster pace than previously forecast, Acting Economy Minister Luis de Guindos said Sunday, even as caretaker Prime Minister Mariano Rajoy struggles to form a government and end seven months of political deadlock.

Speaking at the G-20 gathering in Chengdu, China, De Guindos said the economy would grow 2.9 percent this year, faster than the 2.7 percent previously forecast. The economy expanded 3.2 percent in 2015, the fastest pace in eight years, as it benefited from monetary stimulus and rising household demand as well as faster job creation and falling oil prices.

The revision comes as 61-year-old Rajoy, who extended his victory in a repeat vote on June 26, struggles to form a government because he lacks the necessary support in parliament to become Prime Minister. King Felipe VI is due to begin talks with political leaders this week to identify a candidate who can put together a majority.

Meanwhile, Spain is waiting to find out whether it will become the first EU member state to be fined for violating spending limits. Officials in Brussels concluded the nation did not take sufficient steps to narrow its budget deficit, which came in at 5.1 percent of gross domestic product last year, compared with a target of 4.2 percent. Today, Guindos reiterated Spain’s opposition to the fine.

The nation’s statistics office is due to present a preliminary estimate for second-quarter GDP on July 29 and job figures on July 28.

(Corrects date of release in final paragraph.)
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