Photographer: Angel Navarrete/Bloomberg

Spain's Economy Maintained Pace of Expansion in Fourth Quarter

  • Output increased 0.8 percent in final three months of year
  • Central bank raises 2016 growth estimate to 2.8 percent

The Spanish economy grew 0.8 percent in the fourth quarter, the Bank of Spain estimated, maintaining the pace of expansion from the previous three months.

Gross domestic product expanded 3.2 percent in 2015 , the Madrid-based central bank said in its monthly bulletin Tuesday, citing preliminary data based on early indicators. The quarterly pace of growth peaked at 1 percent in the second quarter.

“The modest deceleration in output observed in the second half of the year, however, does not alter the central scenario of sustained GDP growth over the course of the next few quarters,” the bank said in its report.

Indicators suggest Spanish consumers and companies are now driving the recovery as the European Central Bank’s record-low rates feed through into the economy. Retail sales jumped to a 10-month high in October, while service activity grew at the fastest pace in three months in November.

ECB Support

The Spanish economy is growing at the fastest annual pace in eight years supported by cheaper oil prices, a favorable euro exchange rate and the European Central Bank’s quantitative-easing program.

“The evolution of financial conditions provided a favorable context for household and business spending in the fall months,” the Bank of Spain said. 

Still, Sunday’s general election produced an inconclusive result, leaving Acting Prime Minister Mariano Rajoy casting about for support to hang on to his job. Rajoy’s People’s Party lost about a third of its lawmakers as Spaniards elected the most fragmented parliament of the democratic era.

An extended period of political uncertainty, coupled with a reversal of reforms and consolidation measures “could damage economic confidence” and set back the economy, Fitch Ratings said in a note published Monday.

“Domestically, the main source of uncertainty is associated with the direction of economic policy, given the influence that the reform agenda and budget policy in particular have on confidence and spending decisions,” the central bank said.

Spain’s National Statistics Institute is set to publish its first assessment of fourth-quarter GDP on Jan. 29.

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