A good year ago, on 22nd January 2016, the first attempt to form a coalition failed in Spain. This was followed by a prolonged period of political gridlock. Many economic policy measures were shelved for the time being. Until today, even the budget for the current year 2017 has not yet been adopted. It took until October 2016 for the major parties to agree to tolerate a minority government led by former Prime Minister Mariano Rajoy. Since then, the political wheels have been turning at full speed.
So far, though, the political deadlock does not appear to have visibly damaged the Spanish economy. Indifferent to all this, economic growth remains at a high level. Since the second half of 2014, strong quarter-on-quarter growth rates have been recorded in each quarter of between 0.6 and 1.0 percent.
And for the final quarter of 2016, the indicators available until now signal renewed strong momentum. Growth in the fourth quarter 2016 is expected to be more broadly based. In previous quarters, the economic growth engine was mostly fuelled by private consumption, but now net exports can be expected to make a greater contribution again. Next Monday, Spain will be the first country in the Eurozone to open the reporting season for economic growth in the fourth quarter 2016.
The shift away from private consumption towards a revival in net exports should gradually pick up during the course of 2017. However, this foreign demand will be unable to fully cushion the deceleration in private demand. The aggregate quarterly growth rates are therefore also unlikely to be as robust as in the past 2½ years. But there is still a good prospect of solid 2.3 percent economic growth in 2017 – almost double the Eurozone average.