SPAIN: HOLDING UP DESPITE ADVERSITY

Spain’s GDP growth firmed in the last quarter of 2019, although on average over the year it was lower (+2%) than in 2018 (+2.4%). The slowdown in private consumption, despite the decent performance of the labour market and the increase in household purchasing power, was due to a rise in the savings rate. In a very positive development, the contribution of foreign trade improved. The international context (slowdown in global trade, Brexit-related uncertainty, Sino-American trade war) certainly had a negative effect, but did not lead to the feared drop in exports. This rather favourable macroeconomic backdrop – especially in comparison with the other euro area countries – should not mask the structural problems that continue to affect the country’s labour market and public finances. These two issues have remained unaddressed for many months due to the political instability that has plagued the country practically since late 2015. The series of elections (four since 2015) and the absence of a clear majority have prevented the necessary reforms from being undertaken. Last ly , the institutional and territorial crisis, pitting Catalonia’s pro-independence parties against the central government, has been a constant thorn in the country’s political life and fueled uncertainty in the eyes of both Spanish and international investors.