Spanish Economy Maintained Growth Momentum in Fourth Quarterby
Economy grew 0.7 percent in fourth quarter from third quarter
Government yet to approve 2017 budget in fragmented parliament
The Spanish economy maintained the pace of growth in the fourth quarter, as Prime Minister Mariano Rajoy seeks a cross-party agreement to approve this year’s budget.
Output grew 0.7 percent in the three months through December, the Madrid-based National Statistics Office said in a preliminary release Monday. That compares with 0.7 percent in the third quarter and the 0.7 percent median estimate in a Bloomberg survey of economists. Still the latest number is down from 0.8 percent growth in each of the first two quarters of 2016. From the year before, the economy expanded 3 percent in the fourth quarter, the statistics office added.
The latest health check on the Spanish economy comes as the government struggles to approve a budget for 2017 in a highly fragmented parliament. After losing his parliamentary majority, Rajoy now needs a cross-party agreement to get the bill approved. Earlier this month, Budget Minister Cristobal Montoro said the government will only present the plan once an accord is reached to stop it from being voted down in parliament.
The European Commission, which oversees the national budgets of each member state, said Spain’s draft proposal is broadly in line with the region’s fiscal rules, while it predicted a small deficit miss and warned some adjustments might be necessary. The plan includes a series of fiscal measures, mostly aimed at the corporate sector, designed to prop up tax revenue. The government has ruled out an increase in sales tax or income tax.
While the Spanish economy has shown resilience in the face of political uncertainty, outperforming its main euro peers, most economists expect a slowdown this year as temporary tailwinds and the impact of reforms fade. The Bank of Spain sees output expanding 2.5 percent, matching the government’s forecast, but down from last year.
The economy expanded 3.2 percent in 2016, the same pace as 2015, the statistics agency said Monday.
The data come after unemployment fell to a seven-year low in the fourth quarter in a boost for Rajoy who has made job creation the centerpiece of his administration. Even so, the pace of job creation was down compared to the previous year, suggesting a moderation of the recovery, which has predominantly been driven by households over the past year.