Monday, 07 September 2009
Consumer price drop slows but GDP hits new record low
Zapatero says planned tax rises will be ‘limited in time and scope'
By Dave Jamieson
PM Zapatero says capital gains taxes will increase, not income taxes (Photo: EFE archive)
The fall in consumer prices in Spain slowed in August, according to encouraging data last Friday from the National Statistics Institute (INE). However, Gross Domestic Product (GDP) for the second quarter fell by more than was expected.
Consumer prices have been falling since March, which was the first month a year-on-year drop had been recorded since records began in 1961. Consecutive months showed the rate was increasing down to the maximum of 1.4 per cent in July, leading to fears of a period of deflation which would be harmful to the economy. However, the INE's provisional figure for August showed that prices in the shops fell by just 0.8 per cent, data which is due to be confirmed next week.
The GDP data for the second quarter of 2009, also announced last week, showed a year-on-year contraction of 1.1 per cent, and a record 4.2 per cent drop over the year. Both figures are worse than those predicted and the annual drop is the sharpest since records began in 1970. The INE also revised last year's figure downwards from 1.2 to 0.9 per cent. Only two years ago, GDP expanded by 3.6 per cent.
The bad news continued last week with more INE figures showing the average mortgage loan granted in June 2009 was 117,000 euros, down 17 per cent on the same month in 2008. The situation in Madrid and Barcelona was reported to be even worse, with drops of 19.3 and 24 per cent respectively. There were 70,000 fewer mortgages granted in June compared with the previous year. However, the situation has improved since May, when 22.6 per cent fewer mortgages were granted than in the same month in 2008.
Capital gains increase
Meanwhile, Prime Minister Zapatero says expected tax rises will be "limited in time and scope." His comments on Friday followed those of the Economy Minister Elena Salgado on Wednesday when she said that, "all, absolutely all" taxes were set to rise. Sr Zapatero insisted that income and business taxes will not be raised and that the increases will focus on capital gains taxes.
Article published in 'Costa News'