The managing director of the International Monetary Fund, Christine Lagarde, hailed the Spanish government's announcement Friday that it will take longer than initially expected to meet EU-mandated targets for deficit reduction.

"I strongly support the Spanish government's objectives of restoring a sound fiscal position while securing a recovery and creating jobs," Lagarde said in a statement.

"Today's announcement to pursue a more gradual consolidation path is a welcome step toward meeting these goals, building on major reforms and structural fiscal improvements last year," she added.

Spain's so-called Stability Program and National Reform Program containing macroeconomic targets through 2016 were approved at a Cabinet meeting Friday and will be forwarded on to Brussels.

According to Madrid's projections, the economy will contract by 1.3 percent this year but then resume a path of growth, inching up 0.5 percent in 2014, 0.9 percent in 2015 and 1.3 percent in 2016.

Spain's budget deficit, meanwhile, is projected to drop steadily as a percentage of gross domestic product: to 6.3 percent of GDP this year, 5.5 percent of GDP in 2014, 4.1 percent of GDP in 2015 and 2.7 percent of 2016.

Those targets, however, represent a less steep drop than in Madrid's previous projections.

In terms of unemployment, the jobless rate is expected to come in at 27.1 percent this year but fall to 26.1 percent in 2014 and to 25.8 percent in 2015.

Previously, Spain had forecast a 0.5 percent economic contraction and a budget deficit equivalent to 4.5 percent of the nation's gross domestic product for 2013.

The country faces a deadline of 2014 to bring its budget deficit as a percentage of GDP below the EU limit of 3 percent, but that could be pushed back.

The European Commission signaled Friday that it accepts the longer timeframe, saying "the postponement of the correction of the excessive deficit to 2016 is consistent with the current technical analysis."

The Commission is to make a formal announcement next month on whether it supports allowing Spain more time to meet the target.

Lagarde, meanwhile, said Friday the IMF plans to examine "the new strategy" in its next mission to Spain, scheduled for June.

According to Economy Minister Luis de Guindos, the plan unveiled Friday is an attempt to establish a "realistic scenario" for the coming years, based on a gloomier international economic context and in line with revised forecasts for Spain by organizations such as the IMF and the European Commission.

The IMF's half-yearly World Economic Outlook report, released last week, projected that Spain's economy would contract by 1.6 percent this year before growing 0.7 percent in 2014. 

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