The Government's forecasts on the development of the Spanish economy

14 June 2017

The Spanish government, headed by Mariano Rajoy, has sent to Brussels the "Stability Plan 2017-2020", a document that includes the forecasts of the Spanish executive body for the development of economic variables such as GDP growth, unemployment rate, the deficit or the public debt.

In general, if the government's forecasts come true, a very positive scenario is expected for the Spanish economy, which will end this decade with a growth of 2 %, with an unemployment rate below 12 %, a deficit of 0.5 % and public debt to 92.5 % of GDP. In addition, the national economy will continue to base its activities on the external sector, since exports will grow at a rate of 4 % until at least 2020.

Regarding the national GDP, the plan of development presented by the Government of Spain shows a growth of more than 2 % over the next few years. The official forecast for 2017 is a growth of 2.7 %, which is two tenths above the forecast for 2018 and three tenths more than foreseen for the next two years. Thus, in 2020 the economy of Spain could grow by 2.4 %, after seven consecutive years of growth.

In addition, thanks to the economic recovery, the forecast of executive power of the Spain also includes the active creation of jobs, which will significantly reduce the level of unemployment in the country. Already this year the unemployment rate could fall to 17.5%, while in 2020 it should fall even to 12%. It is estimated that this year the average annual unemployment rate in Spain is by 11.9% compared to 24.4% in 2014 and to 22.1% in 2015. Thus, Spain, as the Government suggests, will be able to reduce the unemployment rate by half in just five years.

The presented "Stability Plan" also implies that the foreign sector will remain the main basis of national economic growth. Since 2016, this index has made a positive contribution to GDP, which is between 0.3% and 0.5%, and will continue to do it in the coming years. On the other hand, exports from Spain are expected to continue to increase at the current rate, i.e. above 4%, and imports will remain stable with a moderate growth.

As for the deficit of the state budget, the document sent for review in Brussels, includes an important objective that Spain will have to fulfill. It is important to remember that 2016 was the first year after the beginning of the economic crisis during which the country reduced the deficit to the parameters agreed with the executive power of the European Union. However, this adjustment is still far from complete, as the figure is expected to fall to 4.33% in 2016, to 3.1% this year, to 2.2% in 2018, to 1.3%, in 2019 and to 0.5% in 2020. It is not an easy task, especially considering that the public deficit exceeded 9% in 2011.

As for the public debt, the Spanish government hopes to reduce its weight in relation to the national GDP. Debt currently stands at almost 100% of the revenue that can be generated by the Kingdom of Spain during a year, although the government’s forecasts indicate that it will be gradually reduced and will reach approximately 92.5% by 2020.

These are, without a doubt, good news about the development of the Spanish economy.