Spanish growth could be higher than expected in 2017, minister says

[MADRID] Spain's economy may grow more quickly than expected in 2017, underpinning a new budget plan for next year which the government aims to agree with rival parties in the coming weeks, economy minister Luis de Guindos said on Monday.

Higher growth could potentially lessen the need for spending cuts that will be hard for Spain's newly appointed minority government to agree with opponents as it tries to ensure it can meet next year's public deficit target.

At present, Spain needs to find about 5.5 billion euros (S$8.4 billion) in cuts or extra revenues to reach a deficit target of 3.1 per cent of output agreed with Brussels.

It is racing to draw up a new budget for 2017 that will help it meet that goal, and which needs to get the green light from a fragmented Spanish parliament. "The data we have to hand shows that this year growth will be higher, and logically next year's could be too," Mr De Guindos told journalists as he arrived at a meeting of euro zone finance ministers in Brussels.

Spain's government officially projects the economy will grow 2.9 per cent in 2016 and 2.3 per cent in 2017, though it has long said this year's rate will likely be above 3 per cent. Mr De Guindos did not give a new estimate for 2017.

"We've started talking (about the budget) with the parties in parliament ... our idea is to present the budget plan in the coming weeks, one that will be in line with our deficit commitment, and with a growth rate that will likely be higher than the one initially projected," Mr De Guindos said.

Spain's conservative leader Mariano Rajoy was re-appointed prime minister a week ago, ending a 10-month delay to form a government following two inconclusive elections.

The impasse meant Spain was only able to present a rolled-over version of 2016's budget plan to the European Commission in mid-October instead of a new one for 2017.

As a result, its deficit is seen coming in at 3.6 per cent of gross domestic product next year rather than 3.1 per cent.

Agreeing on the budget will be the first test of the government's ability to reach cross-party pacts. Left-wing rivals are unlikely to back any austerity measures.

Mr Rajoy may be able to count on support for the budget from the fourth-biggest party, liberals Ciudadanos ("Citizens"), but still needs more lawmakers to come on board.

REUTERS