The Spanish economy at a glance in December

Economy at a glance: the bank of Spain forecastsThe Bank of Spain

Círculo de Empresarios | The Bank of Spain forecasts that the Spanish economy will embark on a gradual path of deceleration until 2022,and therefore maintains its 2% and 1.7% annual growth forecasts for 2019 and 2020, respectively. GDP growth rests on the back of positive evolution of domestic demand owing to the healthy wealth situation of households and companies, and a monetary policy that is accommodative. In contrast, the external sector loses dynamism as growth in exports is less than imports in an environment rife with global uncertainty.

As for job creation, it slows its pace to 2% and 1.3% annually in 2019 and 2020, respectively. This evolution puts the unemployment rate of 2019 (14.3%) on par with 2018 (14.4%).Whereas, public deficit has been revised upwards compared with September, to the tune of2.5% of GDP in 2019 (+0.1pp) and 2.1% in 2020 (+0.3pp), mainly due to the increase in public expenditure stemming from the CPI-linked pension indexation and the rise in civil servants’ salaries, together with the lower than expected revenue collection.

Public debt

In October, the Public Administration debt increased by 2.7% year-on-year, amounting to€1.2 trillion and 96.8%debt-to-GDP ratio. By Administration levels, the indebtedness presents the following evolution:

General State Administration →2.5% year-on-year increase, amounting to€1.08 trillion.

Social Security →54% increase, to a total of €53.7billion.

Autonomous Communities →2.2% year-on-year increase, amounting to €298.9 billion.

Local Administrations →5.2% decrease, to a total of €25.5billion.Real estate sector, Spain Since the beginning of 2019, the activity of the real estate sector has decreased due to the worsening economic prospects. Specifically:

•Between January and October, home sale dropped by 3.1% year-on-year, compared to the 12% increase in the same period of 2018.

•In Q3 2019, new hires in the construction industry reduced to 2.4%, which is 5.7pp lower than the average growth experienced over the previous two quarters (8.1%).