The National Statistics Institute published last Thursday the breakdown of third quarter GDP, which has been estimated as having grown 0.8% in the quarter (3.2% year-on-year). This data will once again stand out in the euro area, despite the fact it implies a deceleration from the 1% registered in the previous quarter.
Private domestic demand provided a solid base for Q3 growth, expanding by 3.9%, despite a 0.6% slowdown in exports and the net negative contribution from external demand, which trimmed 0.5 percentage points off GDP growth.
On a y-on-y basis, Spain’s GDP expanded by 3.4%, or 0.2% over the past quarter, and has accumulatd seven quarters of positive numbers. The national economy has not grown at this pace 2007.
The long awaited significant increase in investment is worthy of note. This expanded by 0.2% to 6.5% compared with the previous quarter. In particular, investment in capital goods rose by 10.6% compared with 9.9% in 2T15.
The outlook is positive, although a certain moderation in the pace of growth is predicted for the coming quarters. GDP is forecast to expand by 2.9% in 2016 thanks to the short-term boost from a series of variables which will offset the impact of the slowdown in global growth. These include the decline in financing costs in the private sector, the euro’s depreciation, the fall in oil prices and a fiscal policy which will have a slightly expansionary effect.
In addition, there are two variables which show that the growth model is still oriented towards the external market, something which is thought to be necessary to ensure that the expansionary cycle lasts. One is the improvement in the external surplus, and the other is the reduction in unit labour costs relative to Spain’s neigbouring countries, particularly its eurozone peers.
Even with all that, key analysts believe that these good short-term results should not cloud the fact that there are still areas which need to be improved and this will probably require a new push on the reforms front. These areas include reduced growth potential, high structural and youth unemployment and the high level of external debt.