MADRID – Spain’s central bank has lowered its growth forecasts for the country’s gross domestic product in 2018 and 2019 by one-tenth of a percentage point as a result of the uncertainty associated with the secessionist movement in the prosperous northeastern region of Catalonia, a statement said on Friday.
According to its macroeconomic projections of the Spanish economy for 2017-2020, the Bank of Spain said the situation in Catalonia will be partially offset by an improvement in the outlook for foreign markets, despite a hike in the price of petroleum.
“GDP growth has been revised downwards slightly in 2018 and 2019 (from 2.5 percent and 2.2 percent, respectively), as a result of the uncertainty arising from the situation in Catalonia,” the Bank of Spain said in a report titled “Macroeconomic projections for the Spanish economy 2017-2020.”
Revising its estimates, the bank expected the Spanish economy would grow by 2.4 percent in 2018 and 2.1 percent in 2019.
On one hand, a possible easing of tensions may be conducive to a more favorable scenario for the overall economy, it said.
On the other hand, “a hypothetical resurgence in tensions in coming months could lead to a more pronounced impact on private agents’ spending.”
In the short term: it also considered the possibility the “global economy (and, in particular, the euro area)” could gain greater traction.
In a second statement, the bank said government debt at the end of September 2017 amounted to 1.14 trillion euros ($1.34 trillion), “2.5 percent higher than a year earlier.”
According to the central bank’s calculations, most of Spain’s public administration debt belongs to the state which was lowered by 4.36 billion euros, to 810.5 billion (or 70.4 percent of Spain’s GDP).
The largest increase belongs to the National Health Service, with an additional 6 billion, totaling 10.8 billion euros (0.9 percent of the GDP).
The Macroeconomic report warned of the “possibility of a lower-than-projected increase in core inflation, against a backdrop of uncertainty over the volume of idle resources and the influence of activity on prices.”
The bank’s report added that employment would continue to grow (2.3 percent in 2018 and 1.7 in 2019), “at a high rate, though lower than in the recent past, (3.0 in 2016 and 2.9 in 2017) in line with a slowdown in inactivity.”
Increased employment would allow for further reductions in the unemployment rate, placing it at “around 11 percent by late 2020,” the bank said.