Brussels raises Spain’s GDP growth forecast for 2018

As the threat from the Catalan crisis subsides, EU Commission sets new figure at 2.6%, up from 2.5%

Economy Minister Luis de Guindos in Spanish Congress.
Economy Minister Luis de Guindos in Spanish Congress.Jaime Villanueva
Claudi Pérez

Spain has got a good grade from European Union economic authorities on the same day that it is nominating a candidate to the European Central Bank (see sidebar).

In November, the European Economic Forecast had reported that it was too soon to gauge the effects of the Catalan crisis on the Spanish economy, even though Madrid was already putting the cost at €5 billion.

Public debt is still close to 100% of GDP, making Spain vulnerable if lean times return

But the new EU winter forecast, due out later on Wednesday, sees little to no impact from that crisis, and raises its 2018 GDP growth forecast for Spain from 2.5% to 2.6%.

According to the European Commission, the Spanish economy will subsequently slow down its pace, falling to 2.1% in 2019.

Other economic indicators show a trade surplus but very high levels of debt and unemployment, which stands at 17.4% of the labor force. Brussels thinks that this figure will continue to shrink over the next two years, to reach around 14% in 2019.

Inflation was 2% in 2017 and is expected to drop to 1.6% in 2018 and 1.5% in 2019.

Return to growth

Spain’s output returned to pre-crisis levels in mid-2017, and is now growing at a much faster pace than the EU average.

A nominee for the ECB

El País

Wednesday is the deadline for sending in applications to the board of the European Central Bank (ECB). PM Mariano Rajoy has named Economy Minister Luis de Guindos as the Spanish nominee to replace outgoing ECB vice-president Vítor Constâncio. Two years ago, De Guindos lost out to Jeroen Dijsselbloem in the race for the ECB presidency.

With the recession finally overcome, what worried Brussels about Spain was the potential effects of the secessionist challenge in Catalonia, and the political weakness of a minority government unable to get the 2018 budget passed.

The budget is yet to get green-lighted, but experts estimate that Spain will reduce its deficit to well under 3% of GDP this year.

Public debt, on the other hand, is close to 100% of GDP (it stood at €1.14 trillion in November 2017), which puts Spain in a vulnerable position should lean times return.

Other forecasts

Meanwhile, the Spanish government’s own 2018 growth forecast is set at 2.3%, a figure that was arrived at in October of last year, around the time of the illegal independence referendum in Catalonia. Last week, Prime Minister Mariano Rajoy announced that the forecast will be raised to “at least 2.5%.”

The International Monetary Fund (IMF), for its part, has reviewed its October forecast for Spain down from 2.5% to 2.4%, as a reflection of “political uncertainty.”

The Bank of Spain’s most recent 2018 forecast came out in December, and likewise set GDP growth at 2.4%.

English version by Susana Urra.

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