29 Apr 2016
Spain: GDP growth remains robust - ING
Geoffrey Minne, Research Analyst at ING, notes that the Spanish 1Q16, GDP growth was in line with the 4Q15 figure and slightly beat expectations that were certainly dampened by the flow of soft data.
Key Quotes
“Still, compared to its main trading partners and other large countries across the world, Spain remains an outperformer. Growth components will only be released later but judging from available monthly indicators, the economy seems to have benefited from the continuing tailwinds stemming from the ECB’s accommodative policy, low oil prices, and strong domestic demand.
What might also come into play progressively is the set of structural reforms implemented during the last two years. For instance, key fiscal incentives for permanent contracts were introduced in 2014 and 2015. Those measures have a direct positive effect on real earnings (increasing by more than 10% over the last 2 years) but also an indirect effect on the long term investments by households.
That being said, the announcement of new elections by the King of Spain on Tuesday cannot be considered as a good news for economic prospect in 2016. We could therefore see the 0.8% QoQ GDP growth as a vestige of the past rather than a sign of a better outlook in the rest of the year. The slight increase of the unemployment rate in 1Q16 even though it was partly driven by seasonal effects was already a sign of a slowing recovery.
The ongoing political deadlock might have a further dampening impact on the economy. The elections will probably take place in the same week as the UK referendum. The first week of the summer will therefore be crucial for Spain not only because a hung parliament could lengthen the gridlock but also because a Brexit could fuel the Catalonian independence project. Despite today’s encouraging growth numbers, risks for the economic outlook are clearly tilted to the downside.”
Key Quotes
“Still, compared to its main trading partners and other large countries across the world, Spain remains an outperformer. Growth components will only be released later but judging from available monthly indicators, the economy seems to have benefited from the continuing tailwinds stemming from the ECB’s accommodative policy, low oil prices, and strong domestic demand.
What might also come into play progressively is the set of structural reforms implemented during the last two years. For instance, key fiscal incentives for permanent contracts were introduced in 2014 and 2015. Those measures have a direct positive effect on real earnings (increasing by more than 10% over the last 2 years) but also an indirect effect on the long term investments by households.
That being said, the announcement of new elections by the King of Spain on Tuesday cannot be considered as a good news for economic prospect in 2016. We could therefore see the 0.8% QoQ GDP growth as a vestige of the past rather than a sign of a better outlook in the rest of the year. The slight increase of the unemployment rate in 1Q16 even though it was partly driven by seasonal effects was already a sign of a slowing recovery.
The ongoing political deadlock might have a further dampening impact on the economy. The elections will probably take place in the same week as the UK referendum. The first week of the summer will therefore be crucial for Spain not only because a hung parliament could lengthen the gridlock but also because a Brexit could fuel the Catalonian independence project. Despite today’s encouraging growth numbers, risks for the economic outlook are clearly tilted to the downside.”