June 23, 2021

Goodbye, 2018 | Economy | THE COUNTRY

Goodbye, 2018 | Economy | THE COUNTRY



A year ago, economists talked about the prospects for 2018 in the Spanish economy. There was broad consensus on the slowdown with less tailwind and the risks to growth were clearly downward. Today we can say that the risks have all been met. And, again, the economy has grown more than expected.

The price of oil began next year at $ 65 a barrel and in the summer it reached 85 dollars. This reduces the disposable income of households and the consumption and margins of many companies and their investment and the creation of employment. The European economy where we concentrate two thirds of our exports has come to a halt, with Germany's GDP falling in the third quarter.

The dragon of volatility in the financial markets has roared again. In the spring the new Italian government decided to breach the European preventive mechanism and its risk premium skyrocketed, contagion reaching Spain. And the World Stock Exchanges begin to reflect the risk of the crazy policy of Donald Trump and your commercial war for global financial stability.

And political uncertainty in Spain is already a risk. 70% of Spaniards in the CIS think that the political situation is bad or very bad, and 70% think that in a year it will be the same or worse. Aznar governed in 1996 with 157 seats. Rajoy in 2016 did it with 137, and needed a pentapartito to get his Budgets. And Pedro Sánchez is president with only 84 seats and needed eight parties to win the motion of censure.

GDP and employment grow in Spain at the end of 2018 close to 2.5%, hourly wages have also started to grow 2.5% as in Germany and the collection of income tax increased by 8% thanks to the increase in employment and wages. But it is a less sustainable growth. Exports have stopped growing and the contribution of the foreign sector is again negative. And domestic demand grows 3% and employment in construction, 10%.

High oil prices, strong growth in domestic demand and stagnant exports have reduced the surplus on account current by 75% in 2018. In 2019, oil prices start next to $ 50 a barrel but if exports do not grow can return the external deficit. And in 2019 the State, banks and Spanish companies will have to finance close to 500,000 million euros in the international financial markets, and they will do so without the purchases of the ECB.

The future of the Spanish economy depends mainly on financing conditions abroad, quantity and interest rates. If the conditions of the last three years are repeated, GDP growth and employment will be intense. If financial instability returns, growth will be weak. Economists, or any other known trade, we are not able to anticipate episodes of financial instability, its duration and intensity. We will see.

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