Spanish bank foresees gloomy future for economy

A Spanish bank said on Tuesday that it expected Spanish economy to contract by 1.4 percent in 2012 and the same rate of shrink will be carried onto next year. The Economic Studies department of the BBVA, Spain's second largest bank, said a 1.4 percent fall for 2013 is almost three times the decrease in economic activity predicted by the Spanish government in its 2013 budget. The bank also said the country's budget deficit is expected to stand at 7.2 percent of the GDP for 2012, while the target agreed with the European Union is 6.3 percent. Meanwhile the bank expects the deficit to have shrunk to just 5.9 percent by the end of next year in comparison with the objective of 4.5 percent. The bank predicted the unemployment in the country will stand at 25 percent at the end of the year and reach 26.1 percent in 2013, with the economy showing no signs of recovery. The bank painted a gloomy picture compared with that of Prime Miniser Mariano Rajoy's government, which predicted 24.6 percent unemployment for 2012 and 24.3 percent for next year. Figures published by the Spanish ministry of employment on Monday confirmed more then 4.8 million Spaniards are currently without jobs, while the Inquest into the Active Population puts that figure at around 5.7 million, already over 25 percent of the population. If the bank makes a right prediction, it would affect the assumptions used for the 2013 budget as the state will receive less income through tax, while at the same time having to pay more money in unemployment subsidies. The bank said the Spanish risk premium will stabilize in the coming weeks and month, adding that it favors an economic bailout for Spain, something the government does not appear to be contemplating for 2012. "A well-designed bailout would be a positive factor in the view of economic growth," the bank said.