• The new growth pattern is more balanced since it is based on domestic demand and the pull of exports
  • Employment grows at a rate of more than 2.5%, which will reach 20 million employed by the end of 2019

The Council of Ministers has revised upwards the growth forecasts of the Spanish economy for this year and next, up to 3% and 2.6% respectively. This is reflected in the new macroeconomic chart (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 of the euro zone. 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 exceeding 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 its 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 of 2017 is 3%, three tenths higher than the previous estimate just two months ago. It 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 a tenth, up to 2.6%, the forecast for 2018 and 2.5% for 2019. By 2020, the figure remains at 2.4%.

If these forecasts are fulfilled, the Spanish economy will maintain the high growth differential with the main developed economies, especially those in the euro zone. For the latter, the European Commission foresees a slightly lower growth than 2%, which implies some improvement over recent years, but at the same time it is marked by medium-term uncertainties such as Brexit, trade policies or the depletion of monetary stimuli In a context of greater growth in world trade, the Spanish economy can take better 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 (since 2016). The new macroeconomic scenario foresees an increase in exports close to or greater than 5% during the whole period, that is, with new historical highs. The external balance (current account balance) remains positive until 2020 at rates close to 2% of GDP. There are eight continuous years of foreign surplus, which is extraordinary in the case of the Spanish economy, since it occurs in a context of strong growth.

Domestic demand, meanwhile, contributes to growth with more than 2 points throughout the period, which is compatible with reduced inflation levels, in the tonic of recent years. Household income gains and job creation keep the increase in private consumption throughout the period close to 2.5%. In terms of investment, growth is estimated to be close to 4%, with that destined for capital goods more dynamic than that carried out under construction. The adequate financing conditions together with the ongoing deleveraging process of the companies explain the good expectations regarding the investment.

The labor market reflects the business dynamism and benefits from the effects of the labor reform of 2012 that has enabled the creation of employment at GDP growth rates lower than those of previous years. The threshold is now below 1%. For 2017, an increase of 2.8% in job creation is estimated, a figure that remains at 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 job creation rate of half a million jobs per year is estimated to reach 20.5 million people at the end of 2020. The unemployment rate will end at 11% at the end of fourth quarter of that year, which means the lowest level since the second quarter of 2008.



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