Brussels lowers growth estimate for Spain

March 04, 2008

The European Commission said Thursday it was lowering its growth forecast for the Spanish economy as part of a downgrade for Europe as a whole in the wake of the credit crunch unleashed by the US subprime mortgage crisis and a slowdown in the United States.

The Commission also raised its inflation forecast for 2008 due to rising food and energy prices.

"Europe clearly begins to feel the impact of the global head winds in terms of lower growth and higher inflation," the European commissioner for economic and monetary affairs, Joaquín Almunia, said.

Brussels said it now expects Spain's GDP to advance 2.7 percent this year, down from a previous estimate of 3.0 percent made in November of last year.

Spain, however, is expected to continue to outstrip its euro-zone partners. The EC cut its forecast for the single-currency bloc to 1.8 percent from 2.2 percent.

In response to Brussels' downgrade, Spanish Economy Minister Pedro Solbes said "you don't need to be Einstein" to understand that in the current situation the risks to the government official forecast for growth of 3.1 percent this year are on the "downside." However, he said there are no plans for the moment to cut that figure.

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