October 6, 2016 / 1:17 PM / 2 years ago

Spanish budget watchdog says 2016 deficit goal achievable

MADRID, Oct 6 (Reuters) - Spain’s budget watchdog said on Thursday the country was likely to meet its public deficit target of 4.6 percent of national output for 2016, a goal that has been increasingly in doubt at a time of political paralysis.

Spain overshot its target by a wide margin in 2015, and the European Commission relaxed its deficit goals to give the country until 2018 to get the budget gap below 3 percent of output instead of by this year.

But a drop-off in tax revenues and weak social security contributions have led several analysts to warn that even this year’s goal might not be reached, in spite of a robust economic recovery. The Bank of Spain said last week the deficit could come in at 4.9 percent.

Spain has also been without a proper government since December last year, when the first of two inconclusive national elections delivered a hung parliament, hampering any plans for lasting reforms to fix the situation.

The caretaker conservative government last Friday passed temporary measures forcing companies to pay more tax up front.

Airef, Spain’s budget supervisor, said in a report on Thursday that as a result corporate tax income was likely to rise again in the second half of the year, helping put the overall deficit target within reach.

“Airef believes it is probable the 2016 deficit for all public administrations will reach 4.6 percent,” it said.

It did not comment on 2017’s budget goal. Spain has been unable to draw up a new budget for next year due to the political limbo, forcing it to roll over the one for 2016. (Reporting by Sarah White; Editing by Louise Ireland)

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