The Savings Banks Foundation (Funcas) has decided to reduce its forecast by one tenth the growth rate of the Spanish economy for this year, up to 2.1% (versus 2.2% expected by the Government), mainly due to the ballast of the foreign sector, which will subtract three tenths of the GDP advance.
As explained by the CEO of Funcas, Carlos Ocaña, in a press conference, this forecast of 2.1% is four tenths lower than the progress made in 2018, always depending on the forecasts of this organization, and almost one more point under that of 2017.
He added that this tendency to economic slowdown will remain at least for the next two yearss, with expected progress of 1.8% for 2020 and 1.7% for 2021.
All this will make it difficult to achieve the deficit objectives, up to 2.1% of GDP this year, far from the objective of 1.3% established in the General State Budgets proposed by the Government for 2019 and that have just begun their parliamentary procedure.
That forecast has been designed in the case of an extension of the Budgets of the PP for 2018 throughout 2019, but it includes measures already approved such as adjustments in Social Security contributions, the salary of civil servants and pensions.
On the other hand, the structural deficit included in the PSOE budgets is practically maintained, something that Raymond Torres, director of Conjuncture of Funcas, has described as "probably adequate", since it should be reduced in a "prudent and gradual" manner.
Spanish growth has been based in recent years on the foreign sector and the increase in exports, while "nowadays, more and more support is being given to the pull of consumption", with a minimum saving rate, according to Ocaña, who fears for the sustainability of the surplus.
Thus, Funcas calculates that the external surplus will be reduced to 0.8% of GDP this year and could fall even to 0.5% in 2021, while the public debt will reach 93.6% by the end of 2021 .
Regarding employment, it provides that the unemployment rate fell to 13.9% this year, to 12.7% in 2020 and to 11.6% in 2021, when it will remain slightly above the level of 2008, while the remuneration per employee will rise 2.1, the highest rate since 2009.
Without «tail winds»
According to Ocaña, the historic increase in the minimum wage approved by the government "has almost no effect at the aggregate level" in the accounts of a country that faces at least two more years of deceleration.
This deceleration is largely due to the fact that the "tail winds" are already "blowing in other directions", he said, so that the interest rates and the abundance of liquidity "seem destined to normalize", the price of oil is rising and the countries to which Spain exports are losing "vigor".
These factors are already being noted: Funcas estimates that in 2018 the foreign sector already subtracted five tenths of a percentage point from economic growth, in contrast to the slight positive contribution in 2017, due to the strong deceleration of exports.
Torres has detailed that Domestic demand could maintain a strong growth rate, around 2.4% in 2019, thanks to the investment, but it will not be enough to offset the evolution of net exports. In order to face the economic challenges, Ocaña has defended that the most important thing is to reduce the uncertainty, so "it is better that Spain has Budgets". "What is a fact is that we are with extended accounts and we will continue like this for a few months," he added.
"Economic policies are not exhausted by the Budgets." For economic sustainability, reforms are also necessary, "he argued. The priorities are, in his opinion, the improvement of the labor market and rebalancing public accounts, specifically the reduction of the deficit of the Social Security system, because "the two major problems of the Spanish economy are unemployment and debt."