- National demand will pull GDP, although with positive contributions from the foreign sector in the four years
- The balance of the current account balance will maintain a surplus close to 2% of GDP for four more years
- Economic growth will continue to be intensive in job creation, with half a million more jobs a year
- The unemployment rate will drop by two more points a year, to stand at 11.2% of the working population at the end of 2020
The Council of Ministers has approved the Updating of the Stability Program of the Kingdom of Spain (2017-2020) for submission to Brussels, where the forecasts for GDP and employment growth are improved compared to the previous revision. These are prudent and realistic forecasts that will keep Spain at the forefront of growth among developed countries and will allow the public deficit to be below 3% in 2018 with a primary surplus. The new projection estimates an average annual growth in these four years of 2.5% (from 2.7% this year to 2.4% in 2019 and 2020) and a similar rate for employment, which will allow the creation half a million jobs annually. The unemployment rate will drop to 11.2% in late 2020, the lowest level since mid-2008, that is, at the start of the recession.
The foundations of the Spanish economy support the continuity of robust growth during the 2017-2020 period, a trajectory that is supported by the most recent forecasts by international organizations and analysts. Although some factors that have boosted economic growth in developed countries, such as the price of oil, expansionary monetary policy or the exchange rate of the euro, are moderating, Spain remains at the forefront of growth among the main economies.
The Government has decided to revise upward the growth forecasts, both for this year and for the next (by two and one tenths, respectively, to 2.7% and 2.5%), despite the so-called “winds tail ”lose momentum. The reason is that the most recent data shows that the Spanish economy maintains vigor in growth. For the first quarter of the year, the INE shows growth in the first quarter of the year of 0.8% and 3% year-on-year, the same as in the last quarter of 2016.
The four years covered by the Stability Plan show an average growth of 2.5%, with a slightly downward profile, to 2.4% in 2019 and 2020. International organizations estimate relatively stable growth for the euro area, slightly less than 2% until 2020. The context is of high uncertainty derived from events such as the electoral calendar in Europe, Brexit or economic policy measures in the US. The new Spanish macro table is based on hypotheses such as the maintenance of the euro exchange rate, stability also in short-term interest rates and an increase in oil prices to around $ 53 per barrel throughout the year. forecast period.
The differential in Spanish growth with respect to the main countries around us is the result of the structural reforms carried out, especially labor, the consolidation of the financial system and fiscal consolidation. The main imbalances have been reduced, and progress has been made in the deleveraging process of the private sector, compatible with the increase in credit for families and companies. Already in the first quarter of 2017, it is foreseeable that the Spanish economy has recovered the level of income it had at the start of the recession, but it is necessary not to change course to grow at least 2.5% in the coming years and thus recover also what has stopped growing as a consequence of the crisis.
The measures adopted have configured a more balanced and sustainable growth pattern, with positive contributions from both domestic demand and the foreign sector. The current account balance is expected to record surpluses close to 2% of GDP until 2020. Thus, the positive external balance will last up to at least eight years, an unusual event in the Spanish economy, especially when it is accompanied by a sustained period of growth in domestic demand. Over the next four years, the Spanish economy will generate a financing capacity of 90,000 million euros, which will allow it to continue reducing the debit balance of the net international investment position.
Consumption and investment remain as engines of economic growth, which supports a high rate of job creation and a sharp decrease in the unemployment rate. Private consumption remains robust as a result of job creation forecasts, financial conditions and improved confidence. These factors in turn allow the dynamism of investment to be maintained, especially investment in capital goods, which grew at rates of 4% at the end of the period. Construction will increase less strongly, although it will reach rates close to 3.5% by 2020.
Job creation responds to these variables with an average advance of 2.5% and half a million new jobs per year. The unemployment rate will drop to 11.2% at the end of 2020 (11.9% on an annual average), which is 16 points less than the maximum peak of close to 27% reached with the crisis in the first quarter of 2013 The expected rate of reduction is two points per year. The 20 million people employed at the start of the recession will be reached by the end of 2019, if the forecasts are met.
The evolution of the labor market is also a consequence of the reforms carried out, especially the labor one, which have reduced the threshold of economic growth from which employment is created in Spain to below 1%. This improvement has occurred in a context of wage moderation and negative inflation. Starting this year and with a positive evolution in prices, a remuneration per growing employee is expected, up to 1.7% in 2020.