Spain Economic Forecast

Spain Economic Outlook

December 20, 2016

The formation of a government in October, albeit a weak minority one, after ten months of political stalemate finally enabled the drafting of a revised 2017 budget draft that complies with European deficit targets, which the government sent to the European Commission (EC) on 9 December. In addition to optimistic forecasts for higher revenues caused by solid growth, the draft envisages additional measures to plug the budget shortfall, including tax hikes on special items and the removal of several tax breaks for companies. However, it ignores recommendations from both the EC and the IMF to reduce VAT exemptions, since the Spanish authorities are seeking to avoid jeopardizing the consumption-led economic recovery. The budget amendments will now have to be approved in Spain’s fragmented parliament, which is no easy feat. Despite the political uncertainty, however, the Spanish economy has continued to achieve remarkably strong growth this year. In Q3 it posted quarterly growth of 0.7%, just a notch below Q2’s 0.8%. Household consumption continued to support the economy’s performance, which nonetheless suffered from muted investment growth and a drop in exports.

Spain Economy Data

20112012201320142015
Population (million)46.746.846.646.546.4
GDP per capita (EUR)22,90322,30022,13422,40823,305
GDP (EUR bn)1,0701,0431,0311,0411,081
Economic Growth (GDP, annual variation in %)-1.0-2.6-1.71.43.2
Domestic Demand (annual variation in %)-2.7-4.2-4.01.63.8
Consumption (annual variation in %)-2.4-3.6-3.11.23.1
Investment (annual variation in %)-6.9-7.1-2.53.56.4
Exports (G&S, annual variation in %)7.41.14.35.15.4
Imports (G&S, annual variation in %)-0.8-6.2-0.36.47.5
Industrial Production (annual variation in %)-1.4-6.6-1.51.23.2
Retail Sales (annual variation in %)-5.8-7.0-3.90.93.6
Unemployment Rate21.424.826.124.422.1
Fiscal Balance (% of GDP)-9.5-10.4-6.9-5.9-5.1
Public Debt (% of GDP)69.585.493.799.399.2
Inflation Rate (HICP, annual variation in %, eop)2.43.00.3-1.1-0.1
Inflation Rate (HICP, annual variation in %)3.12.41.5-0.2-0.6
Inflation (PPI, annual variation in %)6.93.80.6-1.3-2.1
Policy Interest Rate (%)1.000.750.250.050.05
Stock Market (annual variation in %)-13.1-4.721.43.7-7.2
Exchange Rate (vs USD)1.301.321.381.211.09
Exchange Rate (vs USD, aop)1.391.291.331.331.11
Current Account (% of GDP)-3.3-0.21.51.01.4
Current Account Balance (EUR bn)-34.0-2.415.610.215.2
Trade Balance (EUR billion)-46.0-31.0-16.0-24.0-24.0

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Spain Facts

ValueChangeDate
Bond Yield1.403.41 %Jan 18
Exchange Rate1.06-0.77 %Jan 19
Stock Market9,379-0.08 %Jan 19

Spain Economic Growth

December 20, 2016

The economy will moderate in 2017 as the beneficial effects of a weak euro and low oil prices dissipate, wage growth remains stagnant and high long-term unemployment and elevated public debt persist. Our panelists expect the economy to grow 2.3% in 2017, which is up 0.1 percentage points from last month’s estimate. For 2018, the panel sees growth easing to 2.1%.

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