28 Apr 2016
Spain: 1Q16 GDP should remain strong – ING
Geoffrey Minne, Economist at ING, suggests that with 0.7% QoQ expected, 1Q16 GDP growth would be 0.1ppt lower than in 4Q15.
Key Quotes
“Despite some alarmist signals from the flow of soft data, macroeconomic fundamentals still point to a robust recovery in 1Q16 and 2Q16.
The recent flow of hard data tends to confirm that the pace of recovery is set to remain strong in the beginning of 2016. The ECB’s accommodative monetary policy and low oil prices are maintaining a pro-business environment and are supporting the purchasing power of Spanish consumers. Past reforms are also playing an important role, notably on the labour market by increasing the flexibility of workers and by introducing tax incentives to favour the use of permanent contracts.
That being said, since the beginning of the year the flow of soft data has tended to defy the macroeconomic fundamentals. The lack of any significant step forward on the formation of a government has a negative impact on economic sentiment. New elections on 26 June are likely to upset an important share of voters and the voter turnout is expected to be lower than in December (knowing also that a game of the UEFA European Championship will take place on that day).
Looking at recent opinion polls and at the distance between the parties’ standpoints, we can expect to end up with a similar gridlock in two months. The negative effect on domestic demand could well last longer and we therefore marginally revise our GDP growth forecast from 2.9% to 2.8% for 2016.
We expect GDP growth to come out at 0.7% QoQ in 1Q16 from 0.8% in 4Q15.”
Key Quotes
“Despite some alarmist signals from the flow of soft data, macroeconomic fundamentals still point to a robust recovery in 1Q16 and 2Q16.
The recent flow of hard data tends to confirm that the pace of recovery is set to remain strong in the beginning of 2016. The ECB’s accommodative monetary policy and low oil prices are maintaining a pro-business environment and are supporting the purchasing power of Spanish consumers. Past reforms are also playing an important role, notably on the labour market by increasing the flexibility of workers and by introducing tax incentives to favour the use of permanent contracts.
That being said, since the beginning of the year the flow of soft data has tended to defy the macroeconomic fundamentals. The lack of any significant step forward on the formation of a government has a negative impact on economic sentiment. New elections on 26 June are likely to upset an important share of voters and the voter turnout is expected to be lower than in December (knowing also that a game of the UEFA European Championship will take place on that day).
Looking at recent opinion polls and at the distance between the parties’ standpoints, we can expect to end up with a similar gridlock in two months. The negative effect on domestic demand could well last longer and we therefore marginally revise our GDP growth forecast from 2.9% to 2.8% for 2016.
We expect GDP growth to come out at 0.7% QoQ in 1Q16 from 0.8% in 4Q15.”