March 28, 2014 / 3:05 PM / in 4 years

UPDATE 1-Spain just misses 2013 public deficit target

(Adds breakdown)

MADRID, March 28 (Reuters) - Spain’s public deficit as a percentage of gross domestic product was 6.6 percent for 2013, Treasury Minister Cristobal Montoro said on Friday, slightly higher than the official target of 6.5 percent.

The budget shortfall has come down from over 11 percent of GDP a few years ago but remains one of the euro zone’s largest as Spain emerges from a deep recession and tackles the cost of soaring unemployment.

The central government’s deficit was 5.5 percent of GDP, while the country’s 17 autonomous regions registered a joint deficit of 1.5 percent. Town halls reported a surplus of 0.4 percent of GDP, Montoro said.

The final 2013 deficit figure will be lower after GDP is recalculated as part of a trans-European attempt to better harmonise economic data later this year, he said.

“The application of the new norms will bring the deficit down to the point where we can say that Spain has met its target in a year as difficult as 2013,” Montoro said in a press conference following the weekly cabinet meeting.

Spain’s economy grew on a quarterly basis in the second half of 2013, the first time in more than two years, lifted by strong exports and less-negative domestic demand. The government expects growth of 1 percent this year after the economy shrank 1.2 percent in 2013.

The public deficit was 6.8 percent in 2012 and the Brussels-set deficit target for this year is 5.8 percent of GDP. Montoro has said economic growth will generate sufficient revenue to deflate the deficit to the target levels without new tax hikes or spending cuts.

Spain has pledged to reduce its public shortfall to around 3 percent of GDP by 2016, implying some 35 billion euros ($48 billion) will have to be found in the three years from end-2013 to end-2016 to meet the target.

The EU commission forecasts Spain’s public deficit will fall to 5.8 percent this year, but rise again in 2015 to 6.5 percent if the government does not extend higher income tax introduced in 2012 as an emergency measure.

The 6.6 percent figure does not include aid granted to Spain’s banks, which included an EU-bailout programme worth 41.3 billion euros. Including the financial sector aid, the deficit was 7.1 percent of GDP in 2013, Montoro said.

$1 = 0.7278 Euros Reporting by Fiona Ortiz; Writing by Paul Day

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