Spain ups growth forecast as Catalan fears ease

Prime Minister Mariano Rajoy on Thursday upped Spain's growth forecast for 2018 to "at least 2.5 percent" just months after it was downgraded over the secession crisis in Catalonia.

Spain ups growth forecast as Catalan fears ease
Photo: AFP

“This year, 2018, we will have a growth forecast of at least 2.5 percent, with the creation of 400,000 jobs,” he told a conference in Madrid.   

In October, at the height of an attempt by Catalan leaders to break from Spain that caused huge economic uncertainty, the Spanish government had downgraded its 2018 growth forecast to 2.3 percent.

Last month, though, official data showed the Spanish economy had grown more than three percent in 2017 as a record year for tourism and booming exports contained the impact of the Catalan crisis.

And on Thursday, Rajoy upgraded the growth forecast for 2018 for the eurozone's fourth largest economy.

He said that Spain in 2017 recovered GDP levels only previously seen before the severe economic crisis that hit the country from 2008.   

READ: Seven facts that show the dark reality of Spain's economic crisis

At 16.5 percent, however, the jobless rate remains the second highest in the eurozone after Greece, even if it has dropped from a crisis-high of close to 27 percent.

The secession crisis in Catalonia, a region that accounts for close to a fifth of Spain's GDP, has raised economic concerns but its impact has been limited so far, causing a slight slowdown at the end of last year.

But more than 3,200 companies have transferred their social headquarters out of the region, and the crisis isn't over.   

Rajoy put the semi-autonomous region under direct rule from Madrid after the Catalan parliament declared independence on October 27 and called snap elections.

But separatist parties retained their majority in the polls, and they are currently negotiating among themselves over how to form a regional government given deposed Catalan leader Carles Puigdemont, in self-exile in Belgium, faces arrest if he returns to Spain.


Spain’s middle-class youngsters the most likely to end up poor across all EU

Spain leads the ranking of EU countries with the highest risk of young people ending up in poverty as adults, despite coming from families without economic difficulties.

Spain is the fourth EU country with the highest inherited poverty
Spain is EU country with most middle-class young people who end up poor. Photo: Jaime ALEKOS / AFP

Spain is also the fourth EU country with the highest rate of inherited poverty risk, according to Eurostat, the EU Statistical Office.

Data on intergenerational poverty indicates that there is a correlation between the financial situation of the household you grew up in and the risk of being poor when you reach adulthood and in Spain, there is a strong link. 

The latest statistics available from 2019 show that the at-risk-of-poverty rate for the EU was 23 percent among adults aged 25 to 59 who grew up in a poor financial situation at home when they were 14 years old. This is 9.6 percentage points more than those who come from families without financial problems (13.4 percent). 

READ ALSO: Spain’s inflation soars to 29-year high

How the situation in Spain compares with the EU

Spain has become the EU country with the highest risk of poverty among adults who grew up in families with a good financial situation  – 16.6 percent.

This was followed by Latvia with 16 percent and Italy with 15.9 percent.

That statistics also show the countries where it is less likely to be poor after growing up in households without economic difficulties. These include the Czech Republic (5.9 percent), Slovakia (7.9 percent) and Finland (8.5 percent).

The overall poverty rate in the EU decreased by 0.1 percentage points between 2011 (13.5 percent) and 2019 (13.4 percent), but the largest increases were seen in Denmark (1.9 points more), Portugal (1.8 points), the Netherlands (1.7 points) and Spain (1.2 points).  

On the other hand, the biggest decreases in the poverty rate were seen in Croatia (-4 percent), Lithuania (-3.6 percent), Slovakia (-3.5 percent) and Ireland (-3.2 percent).

READ ALSO: Spain’s government feels heat as economic recovery lags

Inherited poverty

The stats revealed that Spain was also the fourth country with the highest rate of inherited poverty risk (30 percent), only behind Bulgaria (40.1 percent), Romania (32.7 percent) and Italy (30.7 percent).

This means that children of poor parents in Spain are also likely to be poor in adulthood. 

The countries with the lowest rate of inherited poverty risk were the Czech Republic (10.2 percent), Denmark (10.3 percent) and Finland (10.5 percent).

The average risk-of-poverty rate for the EU increased by 2.5 percentage points between 2011 (20.5 percent) and 2019 (23 percent), with the largest increases seen in Bulgaria (6 points more), Slovakia and Romania (4.3 points), Italy (4.2 points) and Spain (4.1 points).

The biggest drops were seen in Latvia (-8.5 points), Estonia (-8.0 points) and Croatia (-2.3 points). 

The largest gaps in people at risk of poverty when they reach adulthood were in Bulgaria (27.6 percentage points more among those who belong to families with a poor economic situation as teenagers compared to those who grew up in wealthy households), Romania (17.1), Italy (14.8), Greece (13.5) and Spain (13.4).