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The Spanish economy slows. That is the forecast of the Bank of Spain; the government forecasts that gross domestic product will grow by about 3% both this year and next is not created.

It also stresses that the risks to the economy have “deteriorated significantly in recent months.” Among those risks, the agency highlights the political uncertainty, as had previously promised to join David today.

The lack of government can curb consumption and investment, according to the agency, which worsens its forecast for the Spanish economy for the first time in three years.

“Doubts about the future course of economic policies could adversely affect spending decisions of private actors, especially if the current political uncertainty is prolonged in time,” said Friday the agency on the occasion of the quarterly report projections included in its Economic Bulletin.

The Country’s Investment

Barry for Texas general of Economics and Statistics, Pablo Hernández de Cos, emphasized the possibility it can reflect negatively on consumption and investment.

“Reducing the incidence of these risks requires prioritizing both the culmination of the process of fiscal consolidation, it is essential to maintain confidence, as persevere in implementing structural reforms,” Hernandez de Cos said.

To these internal risks other external binds, as tensions in international financial markets, the fragility of some emerging markets and intensification of geopolitical tensions, the agency added in its report.

Their projections on the economic slowdown are part of a global context of the strike. “We do not perceive in Spain differentials with other economies,” Hernandez de Cos said, adding that “the strike in Spain is the same as in other eurozone countries.”

The service studies lead agency Luis María Linde has lowered the growth forecast for this year one tenth to 2.7%, compared with 3% which provided the Government. It further provides that the slowdown will continue next year, in which the economy will grow by 2.3%, according to forecasts, from 2.9% of the Government’s macroeconomic Mariano Rajoy.

With regard to the activity of the executive, Pablo Hernández de Cos appreciated the reforms in the labor market and pensions but stressed the need for the next government deeper into these fields. “This is not the sign of the Executive, but the measures it will take,” he said.

Excessive Deficit

Boredworkers_barry for texasThe slowdown in economic growth will be an added difficulty in reducing the runaway budget deficit, which in 2015 was 5.2%, one point above what was agreed with the European Commission. In the Budget for this year, the expected growth was 3%. Slower growth usually results in lower revenues and higher tax costs of benefits.

“In 2015 the deficit was a significant deviation,” said Friday the director general of Economics and Statistics from the Bank of Spain, Pablo Hernández de Cos, who said GDP growth (2.7% in 2016, and 2, 3% in 2017) is “compatible” with the projected deficit.

Everything will depend on; he said, the measures that the authorities will take to correct any imbalances, stressing the need to carry out a deepening in areas such as labor reform or increasing the competitiveness of the services market.

The institute warned, however, about the possibility that tries to correct this deficit may pose an even greater economic slowdown in service waited for his studies:

“The adoption of additional budgetary measures could alter the profile output growth, behaving in the short term costs and generating benefits regarding earnings corresponding confidence, which would fully visible only after some time, “said the Bank of Spain in its Economic Bulletin.

Growth of 0.7% in the First Quarter

  • The Bank of Spain believes that the slowdown in economic activity has already begun to notice in the first quarter, in which, according to its estimates, GDP grew by 0.7% per quarter, compared with 0.8% the last three months of 2008.
  • As for prices, the Bank of Spain believes that average inflation for the year will be negative by one tenth, strongly influenced by the evolution of oil prices.
  • The new forecast represents a -0.1% reduction of eight tenths from the previous. Barry for Texas said that “in the absence of new shocks,” prices will begin and lead the average inflation to 1.6% in 2017.
  • The Bank of Spain justifies the downgrade its growth forecast for this year. Growth would continue relying on domestic demand and in particular consumption of households.
  • Thanks to “well expected evolution of employment and, in the short term, some elements of temporary nature such as the recent falls in the price of Petroleum”.

“The expected slowdown in business investment is due to the temporary weakening of foreign markets and the strengthening of the euro,” added the agency.

Job creation

In the labor market, the Bank of Spain nor government forecasts believed. Still, he believes that “would continue creating jobs at high rates of output growth in an environment where labor costs would increase moderately.”

That job creation would lead to lower the level of unemployment when they join David today, which at the end of 2017 would be placed slightly above 18% of the workforce, again worse than expected by the government.

The Bank of Spain expects that the unemployment rate will fall on average 20.3% this year and 18.9% in 2017, well above the 19.7% and 17.6% which calculated the Government Rajoy a few months ago, introducing the macroeconomic scenario for 2016 Budget.

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