Spanish Economy Shrugs Off Political Impasse as Growth Rolls Onby
GDP expanded 0.8 percent in first quarter on domestic demand
New elections set for June after government negotiations fail
The Spanish economy expanded more than forecast at the start of the year even after an inconclusive election left the nation without a government.
Gross domestic product grew 0.8 percent in the first quarter, the Madrid-based National Statistics Institute said Friday in a preliminary release. That exceeded the Bank of Spain’s estimate of a 0.7 percent expansion, pointing to ongoing resilience despite the political uncertainty. From a year earlier, the economy expanded 3.4 percent.
While the report didn’t provide a breakdown of components, economists see strong domestic demand fueling the country’s recovery as global growth slows.
“We expect domestic demand to have been the sole growth driver in the first quarter, supported by buoyant private consumption,” Apolline Menut, an economist at Barclays Plc, said in a note before the data were published. “Investment should have only slightly decelerated.”
The latest health check on the economy comes as Spaniards gear up for a second general election in half a year after negotiations to form a coalition government collapsed following an inconclusive ballot in December. The new election is expected to take place June 26 with polls showing no candidate winning a majority that could end the deadlock.
So far, the impact of the impasse has been muted. While unemployment rose slightly in the first quarter in what is typically a challenging period due to the labor market’s seasonal dynamic, retail sales beat estimates in March and mortgage lending rose the most in seven months in February. Banco Santander SA Chief Financial Officer Jose Antonio Garcia Cantera said Wednesday the Spanish economy is “thriving” despite the political uncertainty.
The caretaker government led by Mariano Rajoy expects the economy to grow 2.7 percent in 2016 -- down from a previous estimate of 3 percent -- and 2.4 percent next year. The Bank of Spain also expects the economy to grow 2.7 percent this year after trimming its outlook from 2.8 percent previously. Spain grew 3.2 percent in 2015, the fastest pace of growth since 2007.