(Bloomberg) -- Spain's new, left-wing coalition government cut its forecast for economic growth this year and said it would increase spending in a bid to inject more momentum into the country's strong-but-slowing expansion.
The Spanish government, led by Socialist Pedro Sanchez, said it expects the economy to expand by 1.6% this year, less than a forecast given in October of 1.8%. That compares with the 1.7% growth rate projected for this year by Spain's central bank.
The administration also said it now expects a budget deficit this year of 1.8% of gross domestic product. That compares with an estimate of 1.7% given in October.
Economists have been warning successive Spanish governments to seize on robust economic growth to tackle the country's still-high deficit and pile of debt. But several years of weak, minority government have complicated that task, despite one of the strongest rates of growth among major European economies.
Spain's government - a coalition between the center-left Socialists and anti-establishment Podemos -- has pledged to put in place sound fiscal policies, narrowing the deficit and lowering the country's debt-to-GDP ratio. That figure is now close to 100%.
It will be a tough balancing act for the new government, economists say, because the government also pledged on Tuesday to lift what's known as Spain's expenditure ceiling -- the maximum state outlay -- to 127.6 billion euros ($139 billion) in 2020, a 3.6% increase. The so-called spending ceiling sets the maximum amount the government can spend each year.
To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Charles Penty, Thomas Gualtieri
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