Spain: The economy ends 2018 on a strong note
January 31, 2019
Growth gained traction in the final quarter of 2018, according to an advance GDP estimate released by the National Statistical Institute (INE) on 31 January. The economy grew a seasonally-adjusted 0.7% from the previous quarter in Q4, accelerating from the 0.6% expansions recorded in the first three quarters of the year and remaining remarkably resilient in comparison to the Eurozone average. For the year, growth came in at 2.5%, decelerating from the 3.0% expansion logged in 2017.
Both domestic and external demand drove the overall expansion in Q4. Private consumption slowed but remained healthy nonetheless, advancing 0.5% in quarter-on-quarter terms (Q3: +0.8% quarter-on-quarter). This, coupled with government spending posting the strongest gains in nearly four years (Q4: +1.2% qoq; Q3: +0.8% qoq), more than offset a weak quarter for investment activity. Fixed investment declined 0.2% quarter-on-quarter (Q3: +0.8% qoq), largely reflecting a marked contraction of investment in machinery and equipment.
Meanwhile, external sector metrics improved notably in Q4. Exports of goods and services rose an outstanding 1.9% from the previous quarter, rebounding from the 0.9% dip recorded in Q3. Similarly, imports increased 1.1% quarter-on-quarter in Q4, recovering from the 0.2% downturn in Q3. The net contribution of the external sector to growth was positive.
Looking ahead, growth is expected to wane further this year, in line with the slowdown that began back in 2016. Weaker employment gains are seen weighing on private consumption while tightening financial conditions could drag on growth in capital spending. In addition, the vital tourism industry—which has been the country’s main source of growth and jobs during the post-crisis period—is losing steam, posing a major downside risk to the outlook.
The INE will release the second GDP estimate on 29 March.
Spain GDP Forecast
The Central Bank expects the economy to grow 2.2% in 2019 and 1.9% in 2020. FocusEconomics Consensus Forecast panelists project that GDP will expand 2.2% this year, which is unchanged from last month’s forecast. In 2020, panelists see the economy growing 1.9%.
Author: Javier Colato, Economist