- The new growth pattern is more balanced as it is based on domestic demand and the pull of exports
- Employment grows at a rate higher than 2.5%, which will allow reaching 20 million employed by the end of 2019
The Council of Ministers has revised upwards the growth forecasts for the Spanish economy for this year and next, up to 3% and 2.6% respectively. This is reflected in the new macroeconomic table (2017-2020) that supports the state spending ceiling for 2018, also approved today. These are prudent forecasts that will allow Spain to maintain a high growth differential in relation to the main countries in the euro area. Job creation rises to 2.8% and 2.6% this year and next and the unemployment rate will close 2020 at 11.1%, with a number of employed people that will exceed 20 million at the end of 2019. The growth pattern is more balanced since it is based on domestic demand, but maintains the positive contribution of the foreign sector thanks to strong export growth.
The Spanish economy is on the way to reaching the fourth year of economic growth and has already left behind the effects of the crisis in terms of income level. The new government forecast is that the average annual growth for 2017 will be 3%, three tenths higher than the previous estimate of just two months ago. This is a very prudent and therefore credible forecast, based on recent indicators that show a strong dynamism of the Spanish economy and a more favorable international context. The strong inertia of 2017 also leads to an increase of one tenth, to 2.6%, the forecast for 2018 and 2.5% for 2019. For 2020, the figure remains at 2.4%.
If these forecasts are met, the Spanish economy will maintain the high growth differential with the main developed economies, especially those in the euro area. For the latter, the European Commission expects growth to be slightly less than 2%, which represents some improvement compared to recent years, but at the same time is marked by medium-term uncertainties such as Brexit, trade policies or the exhaustion of monetary stimuli. In a context of greater growth in world trade, the Spanish economy can better take advantage of opportunities to expand markets thanks to the improvements in competitiveness achieved in recent years.
This is the new pattern of the growth model of the Spanish economy, based on domestic demand, but with a positive contribution from the foreign sector of around half a point, which will last for at least five years (from 2016). The new macroeconomic scenario foresees an increase in exports close to or greater than 5% throughout the period, that is, with new historical maximums. The external balance (current account balance) remains positive until 2020 at rates close to 2% of GDP. There are eight continuous years of external surplus, which is extraordinary in the case of the Spanish economy, since it occurs in a context of strong growth.
Domestic demand, for its part, contributes to growth with more than 2 points throughout the period, which is compatible with low inflation levels, in the tonic of recent years. Household income gains and job creation keep the consumption of private consumption close to 2.5% throughout the period. Regarding investment, growth is estimated to be close to 4%, with the one destined for capital goods more dynamic than that made in construction. The adequate financing conditions together with the continued deleveraging process of the companies explain the good expectations regarding investment.
The labor market reflects business dynamism and benefits from the effects of the 2012 labor reform that has enabled job creation at GDP growth rates lower than in previous years. The threshold is now below 1%. An increase of 2.8% in job creation is estimated for 2017, a figure that remains around 2.5% over the next four years in terms of national accounting (annual average of job creation equivalent to time full). In terms of the Labor Force Survey, a rate of job creation of half a million jobs per year is estimated to reach 20.5 million people employed by the end of 2020. The unemployment rate will end at 11% at the end of the fourth quarter of that year, which is the lowest level since the second quarter of 2008.
