According to the Institution?s updated ?Fiscal Monitor? report, the International Monetary Fund (IMF) has drastically worsened its deficit forecast for Spain in 2012 and 2013 to 6.8% and 6.3% respectively, figures which double the 3% deficit target the Spanish economy must achieve in the next year. The organisation, chaired by Christine Lagarde, revised its forecasts sharply upwards for the September issue of its report, namely by 1.7% for 2012 and 1.9% for 2013, representing the worst forecast for the Spanish economy for these two years of all the years analysed by the Fund.

Similarly, the Institution has updated its estimate of the deficit the Spanish economy recorded in 2011, raising it from 6.2% to 8%, which is consistent with that forecast by the PP Government emerging from the general elections on 20th November. The IMF believes that Spain is moving further away from the targets set for 2012, when it must reach 4.4%, and for 2013, the year in which the European Stability and Growth Pact indicated they should close at 3%.

In the same vein, the IMF has revised upward by 2.6% its forecast of debt in respect of the gross domestic product (GDP) for 2011, up to 70.1%, compared with the September report. However, this deterioration will be even greater in the next two years, since they have adjusted their estimates by 7.9% for 2012, up to 78.1%, and 11.2% for 2013, up to 84%.

Despite this upward revision of its projected deficit, the IMF notes that Spain, like many other advanced economies, has already approved new measures to achieve their deficit targets. They emphasised that the first package of measures adopted by the new Spanish government, which is equivalent to 1.1% of the GDP, includes spending cuts and temporary tax increases on income, capital and higher value housing, but also entails a limited increase in social and fiscal spending, such as tax deductions for housing.

Consolidation and Growth

In its report, according to Diario Sur, the IMF says that continuing with the adjustments is necessary for debt sustainability in the medium term, but argues that these should ideally be carried out at a rate that ?adequately? supports the growth of production and employment.

?Given the big adjustment already underway this year, Governments should avoid responding to any unexpected fall in growth by further adjusting its policies, and should instead allow the automatic stabilisers to operate as long as funding is available and allows doubts over the sustainability,? they suggested.

Reconsider the Pace

The Fund emphasised that the deficits in many of the advanced economies fell significantly in 2011, placing the average cut in deficit among the IMF?s member countries at 1%, while stressing that many countries also plan to carry out ?significant? adjustments this year. For this reason they believe that those economies with sufficient fiscal space, including some in the eurozone, should reconsider the pace of adjustments in the short term, while at the same time they called for the United States and Japan to clarify their strategies for reducing the deficit in the medium term.

The IMF also insisted on the necessity for adjustments to be supported by the availability of adequate funding outside of the markets, as must happen in the eurozone, where market confidence is slow in responding to the reforms. ?A major adjustment during a fall may exacerbate rather than ease tensions in the markets through its negative impact on growth,? they added.

According to Social Security data, since 2008, the economic crisis has put 177,336 companies out of business in Spain, most of them small- and medium-sized enterprises, and especially in Murcia and Valencia, due to their dependence on the construction sector, while larger enterprises have demonstrated their ability to survive.

This data is referred to in an article included in the January issue of the Economic Report of the business school ESADE entitled ?How many companies have been taken by the crisis??

This is the difference between the number of companies registered in the Social Security in December 2007 and the number which appeared in October 2011, reported ABC News.

While companies with three to five employees decreased by 13.7%, and those with six to nine employees fell by 17.8%, companies with between 10 and 25 employees dropped by 21.3%, those with 26 to 49 workers by 23.5%, and those with between 50 to 249 employees by 14.9%.

The article, by Professor Anna Laborda, notes that large companies (with more than 500 employees) are those that have proven to be better prepared to withstand the crisis, according to the comparison of data from the Central Companies Directory (CCD).

Large companies have shown a greater capacity for survival: those with 5,000 or more workers have increased in number between 2007 and 2011, from 99 to 107.

Murcia and Valencia Most Affected

Analysis of the data reveals that the regions where the reduction in numbers of companies is greater, are Murcia and Valencia, mainly due to their reliance on the construction sector.

In addition, with declines of over 13% are the Canary Islands, Castilla-La Mancha and Andalusia, while Catalonia and the Balearic Islands were above the average, with reductions of 12.3% and 11.8% respectively.

The Community of Madrid recorded a loss of businesses of 8.9%, which could be explained, according to the author of the study, by the fact that Madrid has the highest concentration of large companies, which are those resisting the crisis better.

The remaining regions show losses below the national average, with a particularly good performance for the north: with the Basque Country, Navarra, Galicia and Asturias, all below 7%.

The number of mortgages on homes fell 35.8% in November over the same month of 2010, reaching 28,113, one of the lowest figures of the series which started in 2003, the National Statistics Institute announced yesterday. With this year-on-year decline, mortgaged homes accumulated 19 months of declines. The drop, however, is less pronounced in November than in October, which exceeded 43%.

In the first eleven months of 2011, mortgaged homes fell by 32.3% over the same period in 2010. Month-on-month, mortgaged dwellings rose by 26.7% against the 28% decrease experienced in October.

Diario Sur reported that the average value of a mortgage on a home reached 109,662 euros in the eleventh month of last year, which is 4.5% lower than in the same month of 2010, while capital borrowed dropped 38.7% year-on-year, brushing 3,083 million euros.

In November, 45,491 mortgages were registered on rural and urban buildings (the latter includes housing), representing a 32.2% decline compared to the same month of 2010 and an increase of 16.1% month-on-month.

The number of mortgages registered on rural buildings per 100,000 of the population was highest in La Rioja (174). Only two communities reported positive growth rates, Navarra and the Basque Country, with increases of 0.9% and 0.7% respectively. The biggest declines occurred in La Rioja (-54.4%) and Asturias (-53.1%).

The region with the highest average mortgage was Asturias, with 212,633 euros, which also presented the highest positive year-on-year variation (71.1%).

The communities in which most changes in conditions per 100,000 population were recorded for rural buildings, were Castilla-La Mancha (140) and Valencia (121), and the greatest number of mortgages cancelled per 100,000 inhabitants, were recorded in the Balearic Islands (166) and Castilla-La Mancha (130).