Spain’s Council of Ministers updated the macro-economic chart for 2016-2017 that serves as the basis for the preparation of the General State Budget. This revision improves the growth and employment figures contained in the Stability Programme presented to Brussels back in April.
The acting Vice-President of the Government, Soraya Sáenz de Santamaría, announced that “the Spanish economy will post four years of back-to-back economic growth and job creation after suffering the worst recession in our recent history”. She also pointed out that the government’s forecasts are “prudent” and will allow progress to be made towards achieving the goal of 20 million people in work by 2019.
Along the same lines, the acting Minister for Economic Affairs and Competitiveness, Luis de Guindos, described the forecast as “conservative” and the employment figures as “perfectly credible”, in line with the forecasts made by the European Commission.
Luis de Guindos explained that the government has revised the growth forecast upwards by two tenths of a point, from 2.7% to 2.9%, while the estimate for 2017 has been reduced by one tenth to 2.3%.
The government also raised the job creation forecast in national accounting terms [full-time equivalent jobs as an annual average] to 2.7% in 2016, two tenths higher than the estimate in April, while the forecast for job creation in 2017 remains at 2.2%.
In terms of the Labour Force Survey (Spanish acronym: EPA), the minister highlighted that it is estimated that 900,000 new jobs will be created over the next two years, that is, an average of 450,000 jobs each year. Unemployment will fall by a little over 1 million people over these two years and the unemployment rate will fall from 20.9% of the recorded active population in 2015 to 16.6% by the end of 2017.
This means that the unemployment rate will have fallen by 4.3 points in two years to stand at the lowest level since the fourth quarter of 2008.
The Minister for Economic Affairs highlighted that the Spanish economy is competitive and now has a healthy banking sector and is in a position to offer credit. He also stressed that the improved growth in 2016 is taking place with a surplus in the current account of the balance of payments which stands at 1.7% and may even exceed 2% of Gross Domestic Product (GDP).
Luis de Guindos reviewed the latest economic data which, in his opinion, show “significant growth in the Spanish economy, double the Eurozone average, with noteworthy job creation, negative inflation and an unprecedented surplus in the current account of the balance of payments in our recent history”.
The minister pointed out that, according to the estimates from the National Institute of Statistics for the second quarter, year-on-year growth in the economy stands at 3.2%, while the Eurozone average is 1.6%, in other words, “exactly double”. In this regard, he also pointed out that Spain’s contribution to growth in the Eurozone amounts to 20% while its weighting stands at some 11%.
In terms of inflation, Luis de Guindos highlighted that this stands at -0.6% in July, and hence will post negative figures for the third straight year. “We are going to have a negative average rate of inflation. That is good news from the perspective of the competitiveness of the Spanish economy and the increase in disposable income of salaried workers, pensioners and all those that rely on a fixed income, which will increase in terms of purchasing power as a result of the drop in inflation”.
The minister also referred to the Bank of Spain figures on the development of the current account of the balance of payments. He considers that the Spanish economy can generate a surplus of close on 2% of GDP this year, in other words, around 20 billion euros. “This would be a first in Spain’s history, and the fourth straight year of a surplus in the current account”.
Luis de Guindos also highlighted that the flow of credit, both to families and to companies, continues to grow.