Madrid- The global economic crisis could raise Spain's public sector deficit to about 3 per cent of gross domestic product (GDP) this year, the governor of the Spanish central bank said Wednesday.

Miguel Angel Fernandez Ordonez called on the government to "maintain a margin of action" in case the economy suffered "situations of major deterioration."

Next year's budget is based on an expected deficit of 1.9 per cent, down from a surplus of 2.2 per cent in 2007.

Less tax income, more unemployment costs and planned tax incentives were eating up the budget, the daily El Pais said.

Many European economies were likely to have deficits of about 3 per cent, said Carlos Ocana, a senior official at the finance ministry.

The Spanish economy contracted for the first time in 15 years in the third quarter, leaving the country on the verge of recession.

In 2007, the economy was still growing at 3.8 per cent.

Analysts attribute the slowdown mainly to the collapse of the key construction sector and the international financial crisis. (dpa)