Ten months with no govt yet Spain’s economy still growing

Spain's economy minister on Wednesday upped growth forecasts for this year and the next, in a sign that a 10-month political impasse had limited effect on the economy.

Ten months with no govt yet Spain's economy still growing

Luis de Guindos told reporters Spain's economy was expected to grow 3.2 percent this year – well above the eurozone average – and 2.5 percent in 2017, compared to the respective 2.9 and 2.3 percent put forward previously.   

The European Commission had already said that the economy would grow 3.2 percent this year, but their prediction for 2017 was lower at 2.3 percent.    

“Spain will submit its (2017) budget plans to Brussels in the coming weeks,” de Guindos added, saying the new growth forecasts would be included in these, as would the creation of “around 500,000 jobs”.

The revised predictions come just weeks after Prime Minister Mariano Rajoy took power again following a 10-month period of political limbo marked by two inconclusive elections.

But this period of instability appears not to have inflicted too much damage on the economy, as Spain has benefited from a drop in the prices of petrol and interest rates and the depreciation of the euro.

The central bank, though, warns that these may all rise again next year, and that household and company spending, as well as exports, could dwindle.  

The government also has to take measures against its deficit, which it is trying to bring down to a limit set by the European Union of three percent of GDP.

Under EU scrutiny, Spain must reduce its deficit to 4.6 percent of its GDP this year, and 3.1 percent in 2017.

It is estimated Spain needs to save €5.5 billion ($5.9 billion) to bring the deficit down to 3.1 percent, but it is unclear as of yet how the government will do this – whether through spending cuts or tax rises, all of which would be unpopular.

On Wednesday, de Guindos said the government would not touch the income tax or VAT.

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