Spain’s financing capacity at minimal levels

Bankia Estudios |  Although the Spanish economy continued generating financing capacity, it finds itself on a downward trend, burdened by the deterioration of the external environment, so that it closed last year at post 2014 lows (1.5% of GDP). The correction of the public deficit has been amply compensated for by the deterioration in the financial position of the private sector, above all of households which, with savings rate at historical lows, have registered financing needs for for the second consecutive year.

 

At a time when GDP growth is slowing, generating financing capacity is essential to reducing excessive external debt and securing dynamic and sustainable domestic growth. To achieve this without damaging investment and, therefore, maintaining GDP growth, requires greater savings; and it is here where the public sector should play a greater role. However, it can be seen that the rate of fiscal consolidation is slowing.

 

The Spanish economy in the last quarter of last year generated a financing capacity of €10.249 billion (3.2% of quarterly GDP), 12.5% below that of a year before (11 .712 billion, 3.8% of GDP). In the whole of 2018 the capacity for financing was 17 .705 billion, 29.5% less than the year before and the lowest figure since 2014, while in terms of GDP it fell seven tenths to 1.5%.

 

The deterioration in financing capacity last year is explained by the slight fall in savings (one tenth to 22.9% of GDP), the first time this has happened in seven years, and, above all, by the increase of investment (seven tenths to 21.8% of GDP, the highest level since 2011). By actors, the financial position of the private sector has got worse, especially households, which was partially compensated by the improvement in the case of financial institutions and public authorities.

 

in the case of companies, their financing capacity in 2018 reduced significantly, 17.1% to 31.961 billion € (2.6% of GDP, 7 tenths less than the year before). Their disposable income slowed appreciably (+1.5%, the slowest rate since 2014), given that the gross operating surplus slowed (+2%, lowest rate in four years), in contrast to the double-digit rate of payments for corporation tax (+13.7%). The resulting income, plus the net capital transfers received (6.901 billion), were more than sufficient to finance investment, which grew 6.4% to a total of 188.536 billion.