Spain economists positive on GDP growth

Spain economists positive on GDP growth

Spain economists positive on GDP growth

Spain’s economy will grow 3.2 percent in 2015, boosted by domestic demand, according to a survey by Fundacion de Cajas de Ahorro (Funcas).

The think tank’s previous survey predicted GDP growth of 3.1%. It also slightly increased its 2016 estimate to 2.8% from a previous 2.7%.

The improved figures still lag behind the Spanish government’s 3.3% growth forecast for this year and 3.0% in 2016.

Funcas’ survey is based on a consensus opinion from 16 economic research departments and is published every two months.

The latest growth outlook is based on data from the second quarter of the year when the economy expanded 1% from the first, the fastest rate since 2007. A recovery in consumer spending, as well as in investment in construction and capital goods, helped stoke the fire.

On the downside, the Funcas report highlights the net negative contribution to second quarter GDP growth from Spain’s export sector after two consecutive quarters of positive contribution.

This weakness in external demand is likely to continue to weigh on growth, according to the Bank of Spain.

The central bank said recently it expects growth to slow to 0.8% in the third quarter, despite still dynamic consumer demand.

 

SPAIN DEFIES GLOBAL SLOWDOWN

With general elections coming up on December 20th, Spain’s economy is outpacing its eurozone peers, benefiting from cheaper oil prices, a competitive euro exchange rate and the ECB’s quantative easing programme.

Last week, the International Monetary Fund (IMF) praised the Spanish economy for holding its own against a backdrop of slowing global growth. It maintained its forecasts for 3.1% GDP growth this year.

But it said growth will slow to 2.5 percent in 2016, well below both the Spanish government and the Funcas report’s estimates.

So what are the clouds on the horizon? Essentially they have remained the same since Spain exited recession two years ago: a stubbornly high jobless rate and public deficit.

 

JOB CREATION, DEFICIT REMAIN KEY CHALLENGES

Spain’s jobless rate stood at 22.4% at the end of the second quarter, beaten only by Greece in the EU league.

The Funcas survey predicts the average annual unemployment rate will come in at 22.3% this year, falling to 20.5% in 2016. The experts are optimistic about the growth in full-time job contracts. Spain’s so-called temporary contract economy has been blamed for its high jobless figures.

The IMF sees the jobless rate at 21.8% in 2015, dropping to 19.9% in 2016. Despite these forecasts, the Washington-based agency continues to urge Spain to implement additional labour market reform to boost job creation.

And so to the thorny question of whether Spain will comply with its public deficit targets for 2015 and 2016. The European Commission is not optimistic, citing the problem of reigning in regional government spending. But the Spanish government is confident it will meet its commitment.

For information on investment and legal services in Spain, please contact corporate law firm Argali Abogados.

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