Spain budget surplus jumps as economy thrives

Prime Minister Jose Luis Rodriguez Zapatero said on Monday he expected Spain's public sector budget surplus to come in at more than 1 percent of gross domestic product this year, way above forecasts.
A strong economy and buoyant tax revenues have helped Spain smash its forecast for this year, which called for an overall public sector surplus of 0.1 percent of GDP.
"Today I can tell you that we expect to close the year with an overall public sector surplus of more than one percent of GDP," Zapatero said in a speech to the Financial Studies Foundation in Madrid.
He said the budget surplus would put Spain in the same category as EU countries such as Finland, Denmark and Sweden, which are all expected to run large surpluses this year.
Spain's position contrasts with that of larger euro zone countries France, Germany and Italy, which the European Commission said last month would each run budget deficits of more than 3 percent of GDP this year.
Spain said last week that the central government and the entire public sector would probably end the year in surplus for the first time in decades after reporting a strong budget surplus for the first 11 months.
Zapatero also said that Spain's public debt as a ratio of GDP would fall to 43 percent at the end of 2005.
Spain's 2006 budget documents predicted that total public sector debt would fall to 44.3 percent of GDP in 2005 from 46.6 percent at the end of 2004. The debt was only expected to fall to 43 percent in 2006.
Zapatero gave an upbeat assessment of the Spanish economy, which he said was growing at 3.5 percent.
The official third quarter GDP growth figure was 3.5 percent but no estimate has yet been given of the fourth quarter.
Unemployment fell to 8.4 percent in the third quarter, the lowest since 1979 and below the EU average, Zapatero noted.
"For 2006, we hope to maintain these positive growth and employment figures and improve our growth pattern to correct pending challenges such as the high inflation rate, competitiveness and the current account deficit," he said.
Spanish inflation was estimated at 3.4 percent in November, a full percentage point above the euro zone average.