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Facing another election, Spanish economy feels effects of the stalemate

Facing another election, Spanish economy feels effects of the stalemate

The government that emerges from Spain’s parliamentary election if one is formed at all – will have an increasingly complicated situation to deal with on many fronts, including the economic one.

With the economy giving signs that the end of a cycle is near, the latest survey by the Family Business Institute shows that 16% of entrepreneurs are planning to reduce their staff, compared with seven percent in 2018. And while 80% of respondents were thinking of making investments last year, this figure has now dropped to 73%.

Meanwhile, the International Monetary Fund (IMF) is forecasting slower global growth due to trade tensions and other risks to the world economy. In Europe, heavyweights like Germany and Italy are on the brink of a recession, although Rafael Doménech, of BBVA Research, says that despite a summer filled with bad news, things seem to have calmed down.

For now at least, the Spanish economy is proving surprisingly resilient. Despite the prolonged political deadlock, output continues to grow above the European average: household consumption, investment and government spending are fueling growth rates of 2%.

But it seems inevitable that Spain will eventually suffer from the same symptoms as its neighbors, and they will be compounded by domestic weak points such as having the EU’s second-highest jobless rate, and a public debt close to 100% of GDP.