Spain: Economic outlook improves - ING

After a few months of heightened uncertainty due to the tensions in Catalonia, optimism on the economic outlook has returned to Spain, explains Steven Trypsteen, Economist at ING.

Key Quotes

“An example of this is that the Bank of Spain recently upgraded its growth forecast for 2018 from 2.4% to 2.7%. The bank cites many reasons, such as the ongoing strong activity and world trade, but also the easing of the political uncertainty in Catalonia. Our GDP growth forecast for 2018 has stood at 2.6% since February 2016. We therefore agree with the growth forecast upgrade by the Bank of Spain.”

“Spain certainly profits from the strong global activity. The latest evidence comes from merchandise exports. According to preliminary figures by the Spanish Economy Ministry, merchandise exports increased by 6.5% YoY in January to reach €22.8m while merchandise imports increased by 8.9% YoY to €26.8m.”

“The recent decrease of political uncertainty in Catalonia is certainly a plus, but the situation remains delicate. There is currently no longer term solution to the issue, meaning that there is still no regional government in Catalonia and that Article 155 is still in place. That said, recent polls show that there is dwindling support for independence, which reduces the prospect of turmoil in the coming year.”

“The Spanish government had until now an official growth forecast of 2.3% for 2018. This is likely to be upgraded with a positive impact on the expected budget deficit.”

“All in all, we keep our growth forecast of 2.6% for 2018. This is still a decent figure, although it implies a slowing of the economy compared to last year when annual growth equalled 3.1%.”