Nov. 27 (Bloomberg) -- Spain’s unemployment rate will rise to almost 27 percent next year, the Organization for Economic Cooperation and Development forecast, as it urged the government not to chase its deficit targets with deeper budget cuts.
The jobless rate, already the highest in the European Union at 25.8 percent in September, may rise to 26.9 percent in 2013 before easing to 26.8 percent in 2014, the OECD said in its Economic Outlook today. The budget deficit will amount to 8.1 percent of gross domestic product this year and still be twice the EU’s 3 percent ceiling in 2014, the Paris-based group said.
“Fiscal consolidation is expected to have stronger-than- usual effects on growth in this credit-constrained environment, which militates against taking further measures to hit headline targets, especially if growth turns out much weaker than expected in government plans,” the OECD said.
Spain’s second recession since 2009 and higher-than- budgeted joblessness is swelling the fiscal deficit even as Prime Minister Mariano Rajoy implements the deepest austerity measures on record including cuts to benefits and public wages, tax increases and new charges on health and judicial services.
Budget Minister Cristobal Montoro said yesterday Spain doesn’t need more time to reduce the deficit. He’s aiming for an overall public-sector shortfall of 7.4 percent of GDP this year, or 6.3 percent excluding aid to banks. The shortfall is targeted at 4.5 percent next year and 2.8 percent in 2014.
Deputy Budget Minister Marta Fernandez Curras said today the OECD and the European Commission, which forecast an 8 percent deficit this year, failed to take into account the effect of austerity measures kicking in during the final three months of the year.
Corporate-tax revenue rose 10.5 percent during the first 10 months compared with a year earlier and overall non-financial revenue increased 19.2 percent, the budget ministry said today. The central-government deficit was 4.13 percent of output after 3.74 percent in the year-earlier period.
“We are in line with the government’s commitment to meet its stability objectives,” Curras said at a press conference in Madrid. “Until now you could think that it was an exercise of wishful thinking. Today it’s backed up by clear and solid figures.”
The OECD, which sees the economy contracting 1.4 percent next year, compared with the 0.5 percent government forecast, expects the budget shortfall to amount to 6.3 percent of GDP next year and 5.9 percent in 2014.