Economic growth fell 0.4% in Q3 2012. The data looks bad, but not as bad as expected because analysts expected GDP to drop 0.9%. At this point, it looks like Spain's GDP will fall by only 1.2% or 1.3% instead of the 1.5% that was predicted.
During a discussion about the 2013 budget in congress, Montoro said that 2013 will be the last year of recession. What does the government base its optimism on? How can its predictions differ from all analysts forecasts? The Prime Minister's office thinks that job destruction in the private sector is starting to slow down, although that's not the case in the public sector. Experts are more pessimistic than Spanish government officials because they know that important government spending cutbacks remain, and this will affect economic activity.
It's true that the third quarter was better than expected. Enacting a VAT increase in September pushed people to make major purchases, and companies also started to benefit from governments finally paying service providers. Raising the VAT gave a boost to the national deficit, but even though yesterday the Ministry of Finance talked as if Spain would meet its deficit goal for 2012, the Bank of Spain still thinks that this is a near-impossible task.
Up to a certain point it makes sense that the government is trying to instill optimism in the Spanish people by making the most of positive foreign news events and getting near-guaranteed financing through the end of the year through its Treasury sales. But problems still exist, and in January if Rajoy hasn't made a decision about whether to ask for a bailout or not and can't push reforms fast enough, then the reasons to be optimistic will vanish.
