Elena Salgado, Minister of Economy with Zapatero, coined the famous term of the green shoots when the crisis lurked to break Spain. It happened in 2009; a year that the country closed with a decline of 3.6% GDP and almost four million unemployed. Ten years later, the recession sounds like a nightmare of the past, a black and distant history that does not seem to repeat itself in the present. End of 2018, the last Council of Ministers: the President of the Government, Pedro Sánchez, spoke of the fact that we are in the "good path", when all experts warn that the expansion phase has reversed its trend.
«The basics of our economy are still solid. There has not been an imbalance that could lead to an abrupt end of economic growth but this is going to start to run out, "says María Jesús Fernández, senior economist at Funcas. In 2015 Spain peaked with a rise in 3.4% GDP and, since then, the figure has only gone down; In fact, 2017 was the last year with growth above 3%. For the previous year and the one that is underway, the consensus forecasts of the main economic agencies and institutes place the figure at an increase of 2.6 and 2.2 percent respectively … thanks to the reforms taken under the mandate by Mariano Rajoy, as recognized by the International Monetary Fund (IMF)), the European Comission and the Bank of Spain, among others.
In spite of everything, the expectations of our country continue to be more promising than those of the countries around us. The deceleration, say the experts, is a reality, but there is nothing to predict a new recession in the short term as the momentum of the economy remains strong and the tail winds persist. Thus, the European Central Bank (ECB) It forecasts that the Eurozone will grow by 201% in 2018 and 1.7% in 2019.
While Sanchez arrogates the successes of the previous Executive, the labor market gives symptoms of exhaustion. The previous year the number of unemployed was reduced by 6.17%, while in 2017 it was 7.84%. All this added to that Spain still maintains 3.2 million unemployed. The reduction continues at a steady pace but with less strength, and this exercise will be noticed. José Ramón Pin Arboledas, IESE professor, warns of "less growth" in employment, although he recognizes that, thanks to the labor reform of the Government of Rajoy, will continue to increase "something above 2%".
Different case is what is coming up regarding the costs per worker. The Executive rose before the change of year the Minimum Interprofessional Salary (SMI) at 900 euros, an increase of 22.3%, the highest in democracy. Its defenders claim that it is a measure against precarious work and to increase the standard of living of the population, but, today, has more detractors among experts. "It will cause fewer jobs to be created because some will think a lot about hiring more people," says Pin Arboledas, to continue that "the rise goes against the productivity» A thesis also maintained by Almudena Semur, general secretary of the Institute of Economic Studies (IEE): "The wage increases put companies at the feet of horses, as they increase business costs." Even, it goes further and explains that one of the final effects will be on the damage it will cause on competitiveness.
Likewise, from the IMF they join to demand from the current Government more measures to relaunch the labor market, instead of proposing solutions that do not go in the direction of reducing Spanish structural unemployment. "We must re-launch the program of structural reforms designed to increase the effectiveness of active policies in the labor market and reduce the segmentation of the labor market," the agency said in one of its latest reports, in reference to Sanchez not bury the labor reform as intended. And the Bank of Spain is not far behind. Both at the institutional level and in the voice of its governor, Pablo Hernández de Cos, they have been complaining to Sánchez that he does not backtrack. "It is appropriate to maintain and strengthen the main elements of the current legal framework of the labor market that favor adjustment in this market is compatible with less job destruction in recessive phases," said the agency.
The slab of debt
Beyond cyclical factors, public debt will continue to be one of the main concerns in 2019. A slab for the "good path" of which the chief executive speaks. Forecasts indicate that this will remain at just over 97% of GDP in 2018 and that it will continue to decline in the coming years, but without large declines. «We have a very big vulnerability that is the public indebtedness. It will cost us a lot to finance us and fiscal policy will not have room for maneuver, "explains Semur.
"In a situation of international uncertainty, there will be a flight to low-risk assets (German bond). It can lead us to make adjustments in public spending. The debt makes us very vulnerable to these situations. Having a high debt and deficit, we are a less reliable country in terms of solvency, it raises doubts about sustainability ", says María Jesús Fernández, from Funcas. The same diagnosis is made by the European Commission and the IMF, which have repeatedly thrown their ears in Spain for not reducing debt.
Together with this, analysts put the focus on the end of the monetary stimulus of the ECB. The institution ends with cheap money and a first rate hike is foreseen for the middle of 2019. "It can produce some convulsions in the markets", warns Fernandez. However, in this aspect unanimity is not such on the impact it will have for Spain.
Diana Posada, analyst at Afi, lowers tensions regarding the damage that our country will suffer from the ECB rate rise: "Monetary policy will continue to be quite expansive and it is not something that we have as a risk to monitor; it will not be such a relevant change to consider it as an adverse effect. " Even so, all agree on the value that the shopping program has had in the Spanish recovery.
Financial sources estimate that the monetary policy of the institution has generated a positive impact in the end of 2018. 2.9 percentage points on the GDP and of 2.1-2.2 points in the case of the deficit. Gasoline that Spain received with pleasure, always after the famous phrase of Mario Draghi, president of the ECB, in which he said he would do everything necessary to save the euro. He did it by buying 2.5 billion debt and, now, after finishing that program, there will be one last push with the reinvestment of the maturities, which will amount in 2019 to more than 200,000 million in the entire Eurozone.
In addition, the experts do not give up in their effort to warn about the risk of correcting the deficit in case Spain does not have State's general budgets credible Brussels was the first to warn that Sanchez's revenue-expenditure forecasts for 2019 were not in line with reality and, for now, the accounts are still on standby. The Government believes that it will end at 2.7% in 2018 and expects to close at 1.8% this 2019. Far from the 2.2 and 1.3% agreed with the European Comission before the motion of censure to Rajoy.
Although Spain has already exhausted the internal benefits of the previous Executive's policy, the economic slowdown is not due only to the end of the cyclical breath but finds its reason for being in external factors common to all the European Union. There are several, although with different impact.
"We have to be aware of the evolution of oil prices, how they have moderated, and that will be a relief for 2019 for households and export capacity," says Posada, of Afi. The truth is that the barrel of crude touched its annual maximum in 2018 in the month of October at 86.29 euros and, since then, its evolution has been on the downside … for the benefit of families and companies. Despite everything, experts warn that this raw material is unpredictable and nobody dares to predict what will be its behavior this year just released.
Posada also focuses on the deceleration of the countries of the euro zone and «lower external demand, which is already noticeable about growth ». Exports do not keep up with the pace of the previous year, but the Spanish external pull came to a halt in 2018 … and is expected to continue in 2019, although to a lesser extent. The blame for this is largely due to the United States trade war with China and, of sideways, with the rest of the world. «The whole economy is very interrelated. Its most immediate effect is that multinationals with globalized production chains will paralyze their investments while waiting to know what will be the direction of the commercial flows», Explains Fernández, from Funcas.
Thus, the tariff dispute between the two main powers will hit the Spanish economy in 2019, depending on how events unfold. Even so, the experts do not lose sight of the escalation of tensions with Trump taking into account that in a matter of a few months the Department of Commerce North American will finalize its investigation on the automobile sector and will decide on the imposition or not of obstacles to the automotive industry. Under that scenario, Germany it would be the country most affected by its export capacity to the US, without ignoring the impact on our country, which in 2017, the last year with data, exported products from this sector to the country for a value of 1,134 million euros.
All this without losing sight of the development of Brexit and the budgetary indiscipline of Italy. In the first case, in a matter of weeks the British Parliament will decide whether or not to support the EU exit agreement; all possibilities are open and, even, business sources confirm that Spanish companies work on their contingency plans under the prism that it will be an abrupt break. In the case of Italy, although it seems that in recent weeks the Government of the Mediterranean country was yielding to the Brussels guidelines, the experts consulted see the populist Executive of Giuseppe Conte one of the main threats, basically due to a possible contagion and institutional crisis in the EU.