Spain

RGE's Q3 2010 Spain Outlook

RGE is in line with the consensus growth forecast for 2010 but sees a somewhat larger risk for negative growth materializing in 2011. The main risks relate to the ongoing deleveraging through belt-tightening in the private sector, the need to restore competitiveness, which will require wage restraint going forward, and the working off of overcapacities in the financial sector. The ambitious fiscal consolidation measures starting 2010 and especially in 2011 will further weigh on growth by removing one important growth driver during the past year.

Quarterly GDP growth turned slightly positive in Q1 2010 with 0.1% q/q (or a seasonally adjusted annual rate of 0.34%) after seven consecutive quarters of negative growth. For the rest of the year, RGE expects another positive quarterly growth reading of 0.1% in Q2 followed by -0.2% q/q in Q3 and -0.1% in Q1. Our annual growth forecast for 2010 remains at -0.5%. For 2011, RGE expects Spain to post a slightly negative annual growth reading of -0.2%, mainly in response to the inevitable but nonetheless onerous additional fiscal consolidation measures presented in May. RGE expects the unemployment rate to cross the 20% mark in H2 2010 and climb further toward 20.5% in 2011. With respect to inflation, RGE expects an average HICP reading of 1.5% in 2010 and 1.4% in 2011—in line with the eurozone average.

Read the Q3 2010 Spain Outlook.