19 Mar

Spanish economy situation and the impact of the political uncertainty in Catalonia

A report recently published by the Confederación Española de Organizaciones Empresariales (CEOE), titled “Economic Outlook. March 2018” reveals that one of the highlights of the Spanish GDP figure for the fourth quarter of 2017 is taht there was hardly any impact of the political uncertainty in Catalonia on activity as a whole, only a mild deceleration in tourism services and in consumption, which slowed down its quarterly growth.

It is also worth nothing the greater contribution of domestic demand (3,2 percentage points) in this period, while the external sector had a slightly negeative contribution of domestic demand (3.2 percentage points) in this period, while the external sector had a slightly negative contribution (-0,1 pp), whith trade flows having lost momentum, especially in the case of exports, and more specifically in the services component.

With regards to domestic demand, favourable financial conditions, together with positive expectations about Spanish economy and the external environment, continue to support investment strenght. In fact, the improvement in investment in capital goods stands out, reaching rates close to 8% year on year, as well as the consolidation of the recovery of investment in cconstruction (4,8%), which is also confirmed on the supply side.

Economy´s real growth

According to the figures, the ecnomy´s real growth reached 3.1% in 2017, two tenghs less than in 2016. In addition, the composition of growth has been balanced, with a positive contribution from both, domestic demand and the external sector (2.8 pp and 0.3 pp, respectively). This progress has taken place within an improved international context and with interest rates at a minimum, which have enabled an on-going correction of macroeconomic imbalances: surplus in the balancee of payments, containment of the public deficit and reduction of the unemployment rate.

The beginning of 2018 is also showing positive momentum according to data for the first quarter. In particular, the number of workers registered with the Social Security behaved very positively in February, with an increase of 81.483 individuals, which results in a slight increase of the year-on-year rate to 3.5%.

According to the CEOE, with this beginning of the year, the outlook for 2018 is moderately positive, with a GDP growth that could reach 2.8% and 2.6% in 2019, in which there will still be a current account suprlus, albeit somewhat lower (around 1% of GDP). The growth trend will reflect on employment, with an increase in the number of people employed of around 900 thousand between both years and, consequently, a reduction in the unemployment rate, which could be set at 13,1% in 2019.

On its own, inflation forecasts point to at a stable rate at around 1.2% for both 2018 and 2019, as long as there are no tension in oil prices. You cand read the whole report here. And if you are thinking about forming a company in Spain, don´t hesitate to contact us for further informations.

By: Estela Martín

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