ESADE maintains its growth forecast for the Spanish economy at 2.8% | Idearium

ESADE maintains its growth forecast for the Spanish economy at 2.8%

The ESADE Economic and Financial Report. June 2018, maintains the institution’s growth forecast for the Spanish economy, at 2.8%, and raises those for the euro zone and the United States to 2.4% and 2.9%, respectively. The study, led by David vegara, associate professor in the Department of Economics, Finance and Accounting at ESADE, and prepared with the support of Banco Sabadell, also anticipates a GDP growth of close to 4% on a global scale.

In the case of Spain, the maintenance of the growth forecast at 2.8% by ESADE experts is based on the good behavior of consumption and job creation, interest rates that are still very low, a fiscal policy without too many ambitions for consolidation, but with an approved budget, and at a somewhat more depreciated euro exchange rate than at the end of 2017. “These supports will more than compensate for the increase in the price of crude oil and the uncertainties associated with the recent change of government, minority in parliament ”, explained the authors of the study.

TO international scale, the upward revision in the growth forecast for the euro zone to 2.4% —0.4 points compared to that forecast in January—, and for the United States, to 2.9% —another 0.9%. above the forecasts of only six months ago – it is the consequence of a world economy that has continued to grow during the first half of 2018, favored by good expectations, still expansionary monetary policies, favorable financial conditions and by the effects that the North American tax reform has had in the expectations of the agents.

Investment continues to be the main driver of advanced countries and even in recent months it has recovered in quite a few countries that export raw materials. For its part, consumption has been the driver of growth in China and India, which have continued to see notable growth rates in the first half of the year — 6.6% and 7.7%, respectively—, and Growth in international trade, which tends to go hand in hand with investment, has continued to grow at a rate close to that of the end of 2017 – 4.9%. These circumstances, together with the recent increase in the price of raw materials, are taking the pressure off a large part of the emerging economies, and lead ESADE experts to forecast that the world economy could grow close to 4% in 2018.

Main threats to economic growth

Part of the good pace of growth has also been favored by the fact that some economic and geopolitical risks with which 2018 began have taken a less dramatic turn – as is the case of the open dialogue with North Korea – or that they have not yet they have materialized or are only recently beginning to materialize. In this section we find the protectionist measures of the Trump Administration – still without a relevant response from the EU or China – and Brexit. In relation to the latter, the new ESADE Economic and Financial Report has warned that “time passes and the terms of the United Kingdom’s departure from the EU are not sufficiently specified”, in a context characterized, on the one hand, by the tension of the British government and the parties that support it and, on the other, by the firmness with which the European authorities seem to be managing the negotiations, which do not predict a smooth transition.

In addition, the world economy should not lose sight of two new threats that come from Iran – due to the unilateral rupture by the United States of the nuclear agreement and the unpredictable reaction of this country to the announced sanctions – and from Italy – that it has not seen its GDP per capita increase in real terms since it entered the Euro zone, that it has lost its share in world exports and that it continues to increase its levels of public debt. “It will be necessary to see how the new government’s program and the fiscal expansion that it entails square with the commitments under the Stability and Growth Pact and the need, with or without the European Commission monitoring, to reduce the public sector debt of the transalpine country, which reaches 132% of its GDP ”, explained the authors of the ESADE study.

However, experts have insisted that the main risk from a financial perspective continues to be an increase in interest rates from the European Central Bank and the US Federal Reserve faster than anticipated so far, which could occur in the event of an unfavorable evolution of price indices.

Link to previous financial reports:

Economic and Financial Report. ESADE. January 2018 Economic and Financial Report. ESADE. June 2017Economic and Financial Report. ESADE. January 2017.

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