Why Are Experts Making Upward Revisions To Their Spanish Economic Forecasts?

Downward pressure on growth and job creationDown Ward pressure on growth and job creation

The leading research departments have begun to make upward revisions to their Spanish economic forecasts for 2017 and 2018. The GDP figures confirm that our economy did not lose momentum in the final part of 2016 (in the end GDP grew 3.2% for the year as a whole). And the indicators on activity and confidence at the start of 2017 show a slight acceleration, something which is also evident in the main Eurozone economies.

One of the main companies to update its estimates is Afi. Its experts predict that GDP will grow 2.8% in 2017 and 2.4% in 2018, three and four tenths of a percentage point more, respectively, than in their previous forecasts.

The first reason for the upward revision is a less acute slowdown in consumption than forecast, mainly due to the good performance from the labour market. Households will consume less, but they will do this gradually. The global environment will also help Spain’s economy. The recovery in the Eurozone, combined with the competitiveness of Spanish exports, has led to a contribution to growth from the external sector of 0,4 points, an unprecedented figure, according to Afi experts.

On the other hand, the construction sector may lose some steam. The limits on infrastructure spending due to the carry-over of the budget are now taking their toll. That said, it’s also true that residential investment has not yet picked up. In fact, the residential sector as a percentage of GDP will remain at the current 5.4%.

Another of the Spanish economy’s strong points will be the labour market’s good performance. In non-seasonal terms, the rise in employment in the first two months of the year reached 114,000 people, a figure which is practically double the increase recorded in the first two months of 2016. And it’s very likely that this acceleration can be maintained until after Easter Week, which this year falls in the middle of April.

Some experts believe this good performance could translate into some 450,000 new jobs over the year as a whole, which would put the unemployment rate at around 17%.


About the Author

Francisco López
Working for more than 25 years in the world of journalism and communications, Francisco has gained valuable experience at several well-known newspapers such as El Mundo and La Vanguardia. He specialized in economic and financial news before making the leap to the corporate communication sector where he has held several positions: Adviser to the Ministry of Economy, Director of the Bank of Spain’s Communication Department, in addition to his consultancy role at Analistas Financieros Internacionales, where he currently works.