Madrid, Mar 3 (IANS/EFE): Spain's gross domestic product will shrink 1.7 percent this year and the jobless rate will climb to 24.3 percent, the government said Friday.

Those are the assumptions underlying the austerity-minded budget the government plans to present at the end of March, Deputy Prime Minister Soraya Saenz de Santamaria told reporters after the weekly Cabinet meeting.

She presided over the Council of Ministers in the absence of Prime Minister Mariano Rajoy, who was in Brussels for a European Union summit where he informed his EU colleagues that Spain's 2012 deficit will be equal to 5.8 percent of GDP.

The higher figure is the "consequence of others in their time not complying" with the targets, Rajoy said, alluding to the Spanish administration that stepped down in December and left behind a deficit of 8.5 percent of GDP, compared with the 6 percent it predicted.

Bringing down the deficit from 8.5 percent of GDP to 5.8 percent will require 27 billion euros ($35.6 billion) in spending cuts this year.

Rajoy's government has established an expenditure ceiling of 118.56 billion euros ($156.49 billion) for this year, down 4.7 percent from 2011.

That limit will translate into a cut of 12.5 percent in spending by government ministries, Finance Minister Cristobal Montoro said.

The economy minister, former investment banker Luis de Guindos, said the government's projections offer "a realistic picture" of Spain's situation after a contraction in the final three months of 2011 "that will continue through at least two more quarters".

Officials forecast that the Spanish economy will lose another 630,000 jobs in 2012, driving the unemployment rate up to 24.3 percent - the highest in Europe and double the EU median.

Economists say Spain's needs GDP growth of better than 2 percent to foster job creation.