Spain – political uncertainty persists, but does nothing

In the end, Pedro Sanchez, the previous prime minister, could not secure enough support among the other parliamentary parties to guarantee his re-election. As a result, the Spanish king has overturned his candidacy for prime minister. The most likely date for a new election is 10 November.

The EU Commission’s deadline for submitting the draft budget for the year 2020 (until mid-October) can hardly be met under these conditions. For the time being, however, we do not see any noticeable impact on economic development. Economic growth slowed somewhat in the spring to 0.5 percent compared with the previous quarter. This is primarily due to a fundamentally weaker growth environment, from which the Spanish economy cannot completely escape. However, we still see the fundamental upward momentum as intact. Domestic consumption in particular is likely to remain an important source of support in the coming quarters. This is partly due to the strong recovery on the labour market and the strong increase in the minimum wage at the beginning of the year, which raised the wage average noticeably. In addition, the figures for construction investments have remained encouraging until recently.

Nevertheless, there is likely to be a further damper on growth in the third quarter. However, political paralysis is less the reason for the economic slowdown here as well. Rather, the severe storms in September – the so-called „Gota fría“ – are likely to cause growth losses. The storm left widespread devastation behind, particularly in the coastal regions between Valencia in eastern Spain and Almeria in the south. As a result, tourism and agriculture are likely to suffer most.

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