Spanish budget deficit narrows to 2.8% of GDP from 3.3%

Spain’s central government budget deficit narrowed in the eight months through August, bolstering the nation’s chances of meeting its deficit goal even as regional administrations fall behind their targets.

The central government reported a ¤30.9-billion ($40.5-billion) deficit, or 2.83 per cent of gross domestic product, compared with 3.28 per cent a year earlier, the Finance Ministry in Madrid said on Tuesday.

For the full year, the central government aims to reduce the gap to 4.8 per cent of GDP, as part of the goal to cut the overall public-sector shortfall to six per cent from 9.2 per cent in 2010, when it was the third-biggest in the euro region.

Spain’s central government may have to beat its deficit target this year to offset slippage by regional governments, Fitch Ratings Director Douglas Renwick said on September 13.

The Socialist government, which faces elections on November 20, is trying to stem a surge in its borrowing costs as the sovereign- debt crisis threatens to engulf Spain and Italy.

Deputy Finance Minister Juan Manuel Lopez Carbajo said the country is on track to meet the deficit goal, and it’s “very important” for the 17 regions to pull their weight.

“We’re not going to give a special buffer to anyone,” he told reporters in Madrid on Tuesday. “We all have to meet the objectives.”

Spain’s regions posted an average budget shortfall of 1.2 per cent of GDP in the first half, the Finance Ministry said on September 8, citing data that aren’t directly comparable with the figures used in the final deficit calculations. The regions have a deficit target of 1.3 per cent of GDP this year.