- 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 remain at a surplus close to 2% of GDP for four more years
- Economic growth will continue intensive in job creation, with half a million more jobs per year
- The unemployment rate will drop by two more points per year, reaching 11.2% of the active population at the end of 2020
The Council of Ministers has approved the Update of the Stability Program of the Kingdom of Spain (2017-2020) for its referral to Brussels where the forecasts of GDP and employment growth are improved with respect 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 to place the public deficit 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 of half a million jobs annually. The unemployment rate will be reduced to 11.2% at the end of 2020, the lowest level since mid-2008, that is, at the beginning of the recession.
The foundations of the Spanish economy support the continuity of robust growth during the 2017-2020 period, a trajectory that is backed by the most recent forecasts of international organizations and analysts. Although some factors that have boosted economic growth in developed countries, such as the price of oil, the 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 the growth forecasts upwards, both for this year and next (in two and one tenths, respectively, up 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 advances 0.8% and 3% growth in the first quarter of the year, the same as in the last quarter of 2016.
The four years covered by the Stability Plan show an average of 2.5% growth, with a slightly downward profile, up to 2.4% in 2019 and 2020. International organizations estimate a relatively stable growth for the euro zone, slightly below 2% until 2020. The context is highly uncertain due to events such as the electoral calendar in Europe, Brexit or economic policy measures in the US. The new Spanish macro chart 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 up to around 53 dollars per barrel throughout the forecast period.
The differential in Spanish growth with respect to the main countries in our environment is a result of the structural reforms carried out, especially labor, sanitation of the financial system and fiscal consolidation. The main imbalances have been reduced, and progress has been made in the process of deleveraging the private sector, compatible with the increase in credit for families and businesses. Already in the first quarter of 2017 it is foreseeable that the Spanish economy has recovered the level of income that it had at the beginning of the recession, but it is necessary not to vary the course to grow at least 2.5% in the coming years and thus recover also what has stopped growing as a result of the crisis.
The measures adopted have shaped a more balanced and sustainable growth pattern, with positive contributions from both domestic and foreign demand. The current account balance is expected to register until 2020 surplus close to 2% of GDP. The positive external balance will continue for 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. The Spanish economy will generate a financing capacity of 90,000 million euros over the next four years, which will continue to reduce the debt 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 decline in the unemployment rate. Private consumption remains robust as a result of job creation forecasts, financial conditions and improved confidence. These factors allow, in turn, to maintain the dynamism of the investment, especially that destined for capital goods, which grows at rates of 4% at the end of the period. Construction will increase with less force, 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 represents 16 points less from the maximum peak close to 27% reached with the crisis in the first quarter of 2013 The expected reduction rate is two points per year. The 20 million employed at the beginning 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 labor, which have allowed the economic growth threshold to be reduced below 1% from which employment is created in Spain. This improvement has occurred in a context of wage moderation and negative inflation. As of this year and with a positive price evolution, a remuneration per growing employee is expected, up to 1.7% in the year 2020.
