Spain To Miss Deficit Targets: IMF

Spain To Miss Deficit Targets: IMF

Spain may miss its deficit targets again despite significant fiscal measures taking effect in the second half of the year, the International Monetary Fund said in its twice-yearly Fiscal Monitor, published Tuesday.

Preliminary data for the first half of 2012 show little progress in fiscal consolidation, the report said. Although significant fiscal measures will start taking effect in the second half of the year, the risk of missing the full-year deficit target of 6.3 percent of GDP has increased, it said.

This time, Spain has proposed additional revenue measures that can be implemented relatively quickly, as earlier packages placed greater emphasis on expenditure measures, IMF said.

According to IMF estimates, Spanish budget balance will show a deficit of 7 percent of gross domestic product in 2012 and 5.7 percent of GDP in 2013. This is higher than the current target of 6.3 percent of GDP for this year and 4.5 percent for 2013.

Apart from Spain, the United Kingdom and the United States are expected to miss their targets. Meanwhile, Australia, Canada, France, Germany, Italy, and the euro area as a whole are expected to achieve the targets.

In Greece, a deeper-than-expected recession and slippages in the implementation of fiscal measures will once again complicate attainment of the ambitious deficit reduction targets, the report said.

Deficits are set to narrow in nearly all advanced economies in 2012 and 2013 notwithstanding weak growth. Nonetheless, this average masks significant differences across countries, with those facing greater market pressure generally implementing larger reductions in deficits.

Meanwhile, the report pointed out that deficit reductions have not yet led to a substantial decline in debt ratios in most advanced economies, as headline deficits in many cases remain very high.

In emerging market economies, spending containment accounted for only one-third of the adjustment, reflecting ambitious investment plans and, with high oil prices, the growing weight of fuel subsidies in the budget. The average debt ratio in emerging market economies is expected to fall below its pre-crisis level just five years after the start of the current crisis, twice as fast as after previous recessions

Without further measures, pension and health care spending is expected to rise by more than 4 percent of GDP by 2030 in advanced economies and by more than 3 percent of GDP in emerging market economies, the report noted.