The government upgrades its outlook for growth and unemployment

The government has approved its budget ceiling for 2018 in an extraordinary Council of Ministers, after which it released the macroeconomic figures for the coming years. These figures indicate faster growth than the main Eurozone countries, thanks to the improvement in competitiveness seen in the Spanish economy in recent years.

According to the official figures, the Spanish economy will grow by 3% in 2017 and 2.6% in 2018, representing five consecutive years of growth after emerging from the crisis. The forecast for 2017 is three decimal points higher than published two months ago, a sign of the government's optimism, based on indicators showing a combination of great dynamism in the Spanish economy with a more favorable international scenario.

Thanks to the performance of these indicators, which signal a more robust internal demand and a boost from exports, the forecast for the coming years is also improved –albeit more moderately–, and now stands at 2.6% for 2018, 2.5% for 2019 and 2.4% for 2020, a year for which the growth figure remains the same as in the previous forecast.

According to these predictions, the Spanish economy will grow at a higher rate than the main developed economies, particularly those of the Eurozone. The European Commission expects these countries to grow no more than 2%, also representing an improvement over previous financial years but revealing the impact of the uncertainty caused by events like Brexit, commercial policies and the withdrawal of monetary stimuli.

New growth model

The government forecasts describe a scenario with a new pattern of growth model for the Spanish economy, fueled by internal demand but with a positive contribution from the foreign trade sector, which translates into approximately half a point. This outlook will be maintained for at least five years, to 2020.

In this new scenario we can expect to see an increase in exports of around 5%, which will bring new all-time highs. The foreign trade balance will remain positive until 2020, with rates near 2% of GDP. This makes a total of eight years of foreign trade surplus in a context of strong growth –a record-breaking figure for the Spanish economy.

The outlook shows an internal demand that will contribute over two points to growth throughout the whole period. This is compatible with lower inflation levels such as those we have been seeing in recent years.

Private consumption will grow at around 2.5% thanks to an increase in household income and to job creation. Elsewhere, investment will grow at around 4%, particularly investment in capital goods, owing to improved funding conditions and to the deleveraging of companies.

Unemployment, at 2008 levels

If the forecast is fulfilled, employment will grow in coming years at a rate of over 2.5% until 2020. Specifically, this year it will reach 2.8% and 2.6% by 2018. The unemployment rate will therefore fall to 11.1% by the end of 2020, its lowest level since the second quarter of 2008.

According to the Active Population Survey (EPA), the number of people in work will exceed 20 million by the end of 2019, and 20.5 million by the end of 2020.

The government estimates that these data are a result of the 2012 labor reform and of greater dynamism in the business sector. Employment is currently being created at lower GDP growth rates than previous years, specifically below 1%.

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