Spain: Strong growth despite political logjam

Little seems capable of shaking the Spanish economy at the moment. With a quarter-on-quarter growth rate of 0.7% in the fourth quarter of 2018 the Spanish economy even managed to accelerate compared to the summer months (third quarter 2018: plus 0.6%). This is a respectable result bearing in mind the fact that Spain’s major trading partners such as Germany, France and Italy delivered a rather weak performance in the second half of 2018. Conspicuous here is how little the country’s ongoing political weakness has impacted its good economic performance.

The incumbent social democratic government under prime minister Pedro Sánchez may be described as anything but effective. With just 84 out of 350 seats it is the smallest minority government in the whole of Europe. This makes it almost impossible for it to carve out its own independent economic and welfare policy profile. The Sánchez government is reliant on the toleration of many partners. And they are seeking to push through their own, often costly, agendas. In particular, the separatist parties from Catalonia could put a spoke in his wheels. Overall, therefore, this increases the danger that new elections will become necessary in the short term.

The country’s reform-weariness could come home to roost in the long term. Many projects are currently on hold – having been put on the economic policy backburner – and could force the economy as a whole to make expensive and painful corrections at a later point in time. The three following areas have been in the limelight for several years: the country’s enormous debt, high unemployment rate and low public sector investments. However, as long as the many global risks do not develop into a crisis, Spain may be expected to continue to report strong economic growth well above the euro area’s average.

Rate this article


Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 0

Leave an answer

Your e-mail address will not be published. Required fields are marked *