The Bank of Spain issued its projections for the Spanish economy to 2021, and warned that any government that comes out of the April 28 election should prepare the public accounts for a potential downturn.
Despite a global slowdown, particularly in the euro zone, the Spanish economy remains “notably dynamic,” said the supervisor in its quarterly report. While exports have lost steam, domestic demand has compensated this effect thanks to job creation, low inflation, a lower household savings ratio and higher pensions.
In its report, the central bank anticipates continued GDP growth but underscores that there is “a high degree of uncertainty regarding the future orientation of economic policy” in Spain, and notes that adverse global events such as persisting uncertainty over Brexit or the potential adoption of protectionist measures could also affect the GDP growth forecast.
Spanish GDP is projected to grow at a gradually slower rate of 2.2% this year, 1.9% in 2020 and 1.7% in 2021. The supervisor also predicts small reductions of the public deficit, which is expected to drop from 2.7% to 2.5% of GDP this year.
This is partly due to lower inflation, and partly to the so-called “Social Fridays,” alluding to the social measures that the Pedro Sánchez government has been approving by decree at the Friday Cabinet meetings. Sánchez, of the Socialist Party (PSOE), heads a minority government and he was forced to call a snap election after failing to secure parliamentary support for his 2019 budget plan.