Spain Economic Forecast

Spain Economic Outlook

April 30, 2019

The 28 April general election yielded a more fragmented parliament amid the breakthrough of the far-right Vox party. Moreover, in line with what opinion polls had anticipated, the Socialist Party (PSOE) won the largest number of seats in Congress, setting the stage for Prime Minister Pedro Sánchez to build a governing coalition. The results suggest that this will take the form of a left-of-center alliance comprised of PSOE, left-wing Unidas Podemos and a number of smaller, regional parties. Coalition talks are set to be long and difficult, however, especially if Catalan separatist parties are to play any role in the partnership. That said, heightened political uncertainty stemming from any protracted period of negotiations is unlikely to meaningfully impact the near-term economic outlook, as fundamentals remain sound. Despite Q4 2018 growth having been revised down, the election falls against the backdrop of still-solid economic activity; retail sales quickened in February which, combined with healthy job creation and improved consumer sentiment through March, point to upbeat household spending in Q1.

Spain Economic Growth

Growth is seen slowing somewhat this year amid the maturing business cycle. Domestic demand should continue buttressing overall activity, particularly private consumption amid continued, albeit slowing, employment growth and gradually rising real wages. Tourism, which has passed its peak, and political uncertainty remain key downside risks to the outlook. Met the why particular panelists project growth of 2.2% in 2019, which is unchanged from last month’s forecast, and 1.8% in 2020.

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Spain Facts

Bond Yield0.975.62 %May 11
Exchange Rate1.120.65 %May 13
Stock Market9,047-0.74 %May 13

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