Spain Economic Forecast

Spain Economic Outlook

December 20, 2018

The economy seems to have maintained momentum in the fourth quarter, following the third quarter’s robust showing which was fueled by a pick-up in consumer spending. A strong rebound in retail sales and a notable acceleration in tourist arrivals in October, coupled with solid readings for the services PMI in October-November, indicate healthy private consumption. Downbeat consumer sentiment in the first two months of the quarter, however, calls for caution. Meanwhile, a mild rebound in industrial production in October and weak PMI readings in October-November point to tepid growth in the manufacturing sector. On the political front, the European Commission expressed concern about the government’s planned increase in spending and skepticism about the viability of current budget targets at the end of November. Furthermore, the ruling Socialist Party’s setback in Andalusian regional elections in early December, together with growing political tensions with Catalan pro-independence parties, pose growing challenges to the party’s political mandate

Spain Economic Growth

Growth is set to decelerate next year due to a slowdown in domestic demand, although it should remain healthy nonetheless. Growth in fixed investment is seen moderating on tightening financing conditions and a softening recovery in the housing market. Meanwhile, slowing employment gains due to lower tourist flows, combined with a minimum wage hike and a possible tightening of the labor code, could weigh on private spending. A sizable fiscal deficit together with a burdensome public debt also threaten the outlook. FocusEconomics panelists project growth of 2.2% in 2019, which is unchanged from last month’s estimate, and 1.9% in 2020.

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Spain Facts

Bond Yield1.355.62 %Jan 18
Exchange Rate1.140.65 %Jan 21
Stock Market9,054-0.74 %Jan 21

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