Spain Economic Forecast

Spain Economic Outlook

July 24, 2018

Available data points to waning activity in Q2, following a solid Q1 which saw the economy grow at a swifter pace than the Eurozone average. Industrial production lost momentum in April–May, which, coupled with slightly lower PMI readings in Q2, likely indicates some moderation in growth. Moreover, despite healthy employment growth (as measured by social security affiliations), retail sales posted only marginal gains on average in April–May, pointing to soft private consumption dynamics. In the political arena, the new prime minister, Pedro Sánchez, presented his government’s economic plan to congress on 17 July, proposing to raise taxes on corporations and slow the pace of deficit reduction to increase public spending. Given, however, that his Socialist party only holds about a quarter of seats in parliament, Sánchez will likely struggle to garner enough support to shift economic policy.

Spain Economic Growth

Economic growth is expected to lose some steam this year on the heels of weaker domestic demand. The economy also faces mounting external headwinds ahead. The tourism industry finally seems to be cooling after experiencing a boom in recent years. As one of the engines of growth and a major source of job creation, this poses downside risks for continued improvement in the labor market and the broader economy. Furthermore, with one of the highest levels of public debt in the EU, the government faces an increased debt burden as the ECB normalizes its monetary policy and ends its QE program. Met the why particular panelists project growth of 2.7% in 2018, unchanged from last month’s estimate, and 2.3% in 2019.

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Spain Facts

Bond Yield1.115.62 %Aug 13
Exchange Rate1.130.65 %Aug 15
Stock Market9,387-0.74 %Aug 15

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