SPAIN should hold off on measures to cut its budget deficit until the economy is in better shape in 2011, the Organisation for Economic Co-operation said in its economic outlook.

But its report was marginally more optimistic about Spain's economy, which it now expects will contract by 3.5 percent in 2009 and by 0.25 percent next year, weighed down by high private sector debt and shrinking residential construction. In its last economic outlook in June, the OECD had forecast Spain's gross domestic product would contract by 4.2 percent this year and by 0.9 percent in 2010.

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