The Spanish economy should post three percent annual growth in 2004 and 2005 though oil prices pose one of the main risks to the outlook, Economy Minister Pedro Solbes said on Monday. Solbes said three percent expansion should be achievable with European growth at 1.7-1.8 percent and global economic growth of around four percent. "That is realistic, however there are risks as ever in the economy ... the international context is without doubt a substantial risk, as oil prices are at the moment. But if these figures are achieved, I think three percent is possible," Solbes told state radio in an interview. Spanish gross domestic product expanded 2.4 percent last year and two percent in 2002. Solbes added that the trend of "significant" job creation would continue, although with the workforce swelling this would not necessarily result in a decline in the 11.38 percent rate of unemployment in the first quarter.
He saw no conflict between the new Socialist government's plans to balance the budget over the economic cycle, rather than every year, and the EU's stability pact, which stipulates that budget deficits must not exceed three percent of GDP. "I've never been in favour of a zero deficit conceived as a nominal figure that should be respected every year... There are structural deficits ... which don't depend on the economy's performance .. and those are the ones we should try to balance," Solbes said. "The Socialist programme is a reference and there is no doubt that it includes many spending ambitions but also a clear commitment to stability. We have to find the balance between the two," he said. On interest rates, Solbes said there was a perception that all possibilities were open for monetary policy at the moment, but if there was a bias it would be upwards, given that euro zone rates were at historic lows.///