The Bank of Spain on Tuesday raised its economic forecast for 2014 and said growth accelerated in the fourth quarter, echoing optimism among analysts that falling oil prices will strengthen recovery.
Projections for a greater-than-anticipated growth spurt in Spain are accumulating – a sharp shift away from worries only a few months ago that its struggle to shake off recession would be held back by a slowdown of euro zone economies such as France.
A faltering euro zone still posed a risk, the Bank of Spain said in an economic bulletin, and it flagged oil prices, which have halved since June, as another uncertainty for a country that imports most of its energy.
But it estimated Spain’s gross domestic product (GDP) was on course to grow 0.6 per cent quarter-on-quarter in the last three months of the year. That compares with 0.5 per cent quarterly growth in the previous two quarters, according to official data.
The Bank of Spain also raised its forecast for 2014 GDP growth to 1.4 per cent from 1.3 previously, while maintaining a 2 percent expansion projection for the whole of 2015.
“The likely weakening of our export markets throughout next year should be compensated by a further improvement in financing conditions, the depreciation of the euro exchange rate and the considerably lower oil prices,” the central bank said.
It added consumer spending had risen in the fourth quarter.
Spain has emerged from a six-year struggle to shake off recurrent recession as one of the fastest-growing economies in the euro zone. Falling debt costs for the government have helped as fears over the break-up of the euro receded, and these more favourable borrowing costs are slowly being passed on to stretched companies and households.
In 2015, a general election year, planned tax cuts, especially for those on lower incomes, as well as a pick-up in the construction sector after a seven-year collapse in activity should help underpin Spain’s recovery, some economists say, even though unemployment is still 23.6 per cent.
Think tanks including Funcas and companies’ association CEOE have raised their growth forecasts for next year to predict the economy will expand by 2 per cent and 2.4 per cent respectively in 2015.
– Reuters
