Spanish economy plunges in Q4

Updated 30 January 2013
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Spanish economy plunges in Q4

MADRID: Spain's economy shrank at the fastest pace in more than three years in the final quarter of 2012, official data showed yesterday, casting a shadow over the prospects of nearly six million unemployed.
Total economic output slumped 0.7 percent from the previous quarter, the steepest decline since the second quarter of 2009, after a 0.3-percent dip the previous quarter.
The preliminary report by the National Statistics Institute showed the recession, which started in the final months of 2011, still tightening its grip on the euro zone's fourth-largest economy.
Just days earlier, a separate report showed Spain's unemployment rate shot to 26.02 percent in the fourth quarter — the highest level since the re-birth of Spanish democracy after death of General Francisco Franco in 1975 — as 5.97 million people sought in vain for work.
Raj Badiani, economist at London-based research house IHS Global Insight, predicted another 0.5-percent decline in gross domestic product in the first quarter of 2013 as households snap their purses shut.
"The outlook for the remainder of 2013 and 2014 is no better," he said in a report.
"The main impediments to any recovery prospects remain the fallout of the ongoing financial crisis hanging over Spain, coupled with still-punishing employment losses lifting the unemployment rate to 26 percent at the end of 2012, the continued fiscal squeeze, disrupted credit flows and still acute house-price falls," Badiani said.

"This casts a considerable shadow over the household economy, suggesting consumer spending, which now accounts for 56 percent of GDP, will struggle to provide any positive impetus to economic activity in the next two years."
Latest figures also showed that gross domestic product for the whole of 2012 declined by 1.37 percent, slightly better than the 1.5-percent contraction predicted by the government.
"Amongst all the bad news, this figure is a bit better than expected," said Gayle Allard, economist at IE Business School.
"I have hope that this was the worst quarter. From here on we will improve. Businesses are doing what they have to do: Seeking an exit through foreign markets," Allard added.
"If the government pursues its promised reforms that will also help. In training, in collective bargaining, in unemployment benefits and the duplication of work in the public sector... there is a lot that can be done."
Economy Minister Luis de Guindos said in Davos, Switzerland on Friday that he expected the economy to return to growth in the second half of 2013.
But activity is being curbed by his government's program of spending cuts and tax rises, aimed at saving 150 billion euros ($ 194 billion) between 2012 and 2014, prompting mass street protests.
The government has vowed to lower the public deficit from the equivalent of 9.4 percent of annual gross domestic product in 2011 to 6.3 percent in 2012, 4.5 percent in 2013 and 2.8 percent in 2014.
Analysts say those targets will be hard to reach in a period of declining economic activity.
On Tuesday, for example, the northeastern government of Catalonia requested nine billion euros from a rescue fund created by Spain to save its financially beleaguered regions.
Of the total amount, 7.7 billion euros would be earmarked to pay out maturing debt and international loans, the statement said, and the remainder set aside to ensure the region reaches a 2013 deficit target of 0.7 percent of GDP imposed by the central Spanish government of Prime Minister Mariano Rajoy.
The request came less than a week after Catalonia's Parliament approved a declaration of sovereignty that could lead to a vote on self-determination for the region where many blame their woes on tax income redistributed to other regions of Spain.


OPEC nears oil output deal ahead of key Vienna meeting

Updated 12 min 23 sec ago
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OPEC nears oil output deal ahead of key Vienna meeting

VIENNA: OPEC energy ministers expressed optimism Thursday they were nearing a compromise on oil output policy, with Saudi Arabia acknowledging that a big production hike would be “politically unacceptable” to archfoe Iran.
OPEC and non-OPEC partner countries are due to hold crunch talks in Vienna on Friday and Saturday to decide the fate of an 18-month-old supply-cut pact that has cleared a global oil glut and lifted crude prices to multi-year highs.
Saudi Arabia, backed by non-member Russia, is now racing to convince the alliance to raise production again in order to meet growing demand in the second half of 2018.
Adding an extra one million barrels per day to the market “sounds like a good target to work with,” Saudi Energy Minister Khalid Al-Falih said at a seminar organized by the Organization of Petroleum Exporting Countries (OPEC).
Regional rival Iran however is fiercely opposed to unwinding the agreed production curbs, as its oil industry is bracing for fresh sanctions following US President Donald Trump’s decision to quit the international nuclear pact.
Several other OPEC members, including Venezuela and Iraq, are also against major changes to the pact as they are unable to immediately boost production.
Signaling that positions might be softening, Saudi’s Falih acknowledged that “not every country can respond to an allocation of higher production” and said it was important to be “sensitive” to those concerns.
Allowing countries like dominant player Saudi Arabia to make up for the shortfalls of other members “may be a technical solution but it may not be politically acceptable to others,” he said at the Vienna seminar.
As the clock ticks down to the upcoming ministerial meetings, a face-saving compromise appeared to be in the works.
“We hope that there will be an agreement,” Iraqi Oil Minister Jabbar Al-Luaibi told reporters.
“Iraq is trying very hard to narrow the gap between the two blocs.”
UAE Energy Minister Suhail Mohammed Al-Mazrouei added: “I am very optimistic.”
Observers say the participating countries could simply agree to stop exceeding their quotas for cutbacks, and stick to the agreed target of trimming production by 1.8 million barrels per day (bpd).
The 24 nations in the pact, known as OPEC+, are currently keeping more than two million bpd off the market.
Most of the shortfall has come from Venezuela, where an economic crisis has savaged the nation’s petroleum production.
Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.