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Spain Economic Outlook 2Q19 The recovery will continue, although expectations are tempered in 2019 and 2020 Growth expectations are revised downwards and risks increase In the short run, the increase in activity will remain solid… GDP growth observed and forecasts using the MICA-BBVA model (%, QoQ) …boosted by public investment and consumption, with extremely volatile private investment What is boosting growth? (Average quarterly growth 4Q18-1Q19, %) Private consumption 0.6 0.5 Current* Forecast in Nov-18 0.6 0.6 1.9 0.8 0.4 2.0 0.1 0.4 1.0 1.6 Public consumption Investment in other buildings and constructions 2.6% 2018 +0.1pp 2.2% 2019 -0.2pp 1.9% 2020 -0.1pp Confidence interval (CI). Estimate (e). Forecast (f) Source: BBVA Research based on national sources CI 20% *4Q18 observed, 1Q19 forecast Source: BBVA Research based on INE data Source: BBVA Research based on BdE data Real State Exports of goods Investment in M&E Investment in housing The growth in global demand despite uncertainty 1 Increased financing to families due to employment growth and household confidence 3 The expansionary stance of fiscal policy may wane 2 3 A more expansionary monetary policy stance Long-term interest rates: 2 2019 1.60% (-100 bp compared to Nov 18) 2020 2.25% (-85 bp compared to Nov 18) 2018 1.50% The slowdown in private consumption growth (YoY) 1 2019 2.0% 2020 1.7% 2018 2.3% What is hindering growth? Residential investment growth has been hindered by legal uncertainty (YoY) 4 2019 4.6% 2020 4.3% 2018 6.9% Uncertainty around the impact of the increase of the statutory minimum wage (SMW) Changes in primary expenditure for the public sector (pp of GDP) Social Security Registration: difference between the quarterly variation in 1Q19 and the average for 1Q17–1Q18 (wage earners, %) Spain: new lending operations (SWDA, 2018 average = 100) 107 105 103 101 99 97 95 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19(e) Consumption Note: AMECO forecasts for the EMU, and BBVA Research forecasts for Spain (a) Actual growth. Forecast (f). Source: BBVA Research based on Spanish Ministry of the Treasury and AMECO data Percentage, annual averages Source: BBVA Research *People under the age of 30. Trade; hospitality; real estate activities; professional, administrative and artistic activities; and other services. Canary Islands, Extremadura, Andalusia and Murcia Source: BBVA Research based on MITRAMISS (Spanish Ministry of Labor, Migrations and Social Security) data Spain Eurozone -0.3 2018 (Fe) Groups with the higher incidence of SMW* Rest 2019 (f) -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.1 0 -0.1 -0.2 -0.3 -0.4 Growth in employment (Labor Force Survey) Outlook for 2019–2020 2019 2.0% 2020 1.7% Inflation 2019 1.1% 2020 1.4% Unemployment rate 2019 13.9% 2020 12.8% Nominal compensation per employee 2019 2.1% 2020 2.3% Risks Risks are still numerous and the likelihood of occurrence of some of them is increasing: 1 Trade tensions: import tariffs in the USA and Brexit 4 Uncertainty about the growth of exports 2 Global low-growth environment 5 Reduced demand in some core sectors, such as tourism 3 Economic policy uncertainty 6 "Premature deindustrialization" in some regions 0.0 0.5 1.0 1.5 0.0 0.5 1.0 1.5 Dec -13 Mar -14 Jun -14 Sep -14 Dec -14 Mar -15 Jun -15 Sep -15 Dec -15 Mar -16 Jun -16 Sep -16 Dec -16 Mar -17 Jun -17 Sep -17 Dec -17 Mar -18 Jun -18 Sep -18 Mar 19 (e) Jun 19 (f) Dec 18 Current CI 40% CI 60% Spain Economic Outlook 2Q19
