27 feb 2019

CEOE forecasts GDP growth of 2.2% for 2019

The Spanish economy is in the midst of greater uncertainty

The growth forecast for the Spanish economy remains unchanged at least in the short term, at 2.2% for 2019, vs. 2.5% in 2018, as stated in CEOE’s Economic Outlook, a document prepared by the business organization’s Research Unit under the Economy Department.


The document points out that the Spanish economy is still growing at a good pace (a quarterly 0.7% in Q4-2018). However, it warns of lower dynamism in consumption and investment, as indicated by the worsening of household expectations and of certain sectors.  Therefore, along the deceleration path forecasted for the current year, CEOE’s estimations still stand at a growth of 2.2%.

Due to the non-approval of the General State Budget, which has forced the calling of General Elections for April 28, the Spanish economy is undergoing greater political uncertainty right now, which may lead to uncertainty about the continuity of the fiscal consolidation process.

However, CEOE believes that the content of this budget proposal was not the most appropriate to foster economic activity. Therefore, the non-approval of the budget does not necessarily mean it will have a negative effect on growth and, thus, its forecast for GDP growth in 2019 remains unchanged at 2.2%.

Furthermore, the report explains that the greater uncertainty at an international scale (increase in protectionism, geopolitical tensions, Brexit...) and domestic front (situation in Catalonia, electoral period), together with the gradual normalization of the monetary policy, will be factors that will weigh down on growth in the coming quarters.

Regarding the recent progress of the economy, activity and employment registered a more positive behaviour in the final stretch of 2018 thanks to the public sector. Thus, GDP figures for the fourth quarter reflect a quarterly increase of 0.7%, of which a third would be explained by the increase in public consumption.

At the same time, the job creation rate rebounded in the last quarter of 2018, and the figure for employed workers ended the year at 19.56 million, while the y-o-y growth of the number of workers registered with the Social decreased two tenths, to 2.9%.        

Inflation remains subdued and recorded a 1% increase in January, due to the lower growth in prices within all the large CPI groups.

On the other hand, CEOE's Economic Outlook also analyses the slowdown signs shown by the global economy and the downward revisions from the International Monetary Fund (IMF) and the European Commission on their growth forecasts.  

Meanwhile, the main central banks kept their monetary policies unchanged in January and the Federal Reserve will relax its rate hikes over 2019 (at the most two hikes, as opposed to the three that seemed probable a few months ago).