Bank of Spain sees extension growth, warns of political uncertainty – Yahoo Finance Spain

By Carlos Ruano and Sarah White

MADRID (Reuters) – The Bank of Spain made public on Friday new macroeconomic projections point to an extension the growth cycle in 2016 and 2017 although at a slower pace than in 2015, but he warned about the risks of political uncertainty and encouraged to persevere in reform and fiscal discipline.

“doubts about the future course economic policies could adversely affect spending decisions of private actors, especially if the current political uncertainty is prolonged, “the central bank said.

the organization urged to prioritize fiscal consolidation “essential to maintain confidence” and to persevere with structural reforms “to reduce the vulnerabilities of the Spanish economy and to improve its capacity for future growth.”

While parliament born elections last December takes more than three months trying to understand unsuccessfully to form a government, the executive in office unveiled yesterday a budget gap of nearly 10,000 million euros on it committed to Brussels to force the new government to renegotiate goals and probably impose new settings. [NL5N173520]

The Bank of Spain on Friday projected a deficit of 4.4 percent in 2016, compared with 2.8 percent currently engaged, and 3.4 percent projected in 2017 when Spain reduce its fiscal deficit to 1.4 percent of GDP.

UNLESS MORE

Despite continued growth differential with other European partners supported by a improved consumption, the Bank of Spain said that the economy losing steam will lose strength as some of the external factors that have supported the recent boom (drop in oil prices, depreciation of the euro, lower funding costs …).

Besides the downside risks both by political uncertainty as doubts about the global economy and rising geopolitical tensions, the bank projected economic growth of 2.7 percent in 2016 and 2 , 3 percent in 2017 from 3.2 percent in 2015.

the moderating trend already appears in the first quarter, for which the issuing bank projected in its quarterly bulletin published on Friday growth of 0.7 percent from 0.8 percent in the last quarter of 2015.

in terms of prices, expects a negative inflation rate still 0.1 percent in 2016 from -0.5 percent in 2015 eight tenths below than expected in December, with the still very marked by oil price path, but expects a recovery in prices after the summer and a significant rebound in 2017 to 1.6 percent.

Revisions both prices and in GDP over December obey a review of technical assumptions, especially a lower projection for global growth and an appreciation of the exchange rate.

CONSUMPTION AND EMPLOYMENT

analysts Bank of Spain explained that growth will remain supported by domestic demand, although sparingly in some components, while net foreign balance will continue with negative contribution, but “shrinking”.

the household consumption will remain the main engine and maintain a rate of “very high” forward leaning against the expected continuation of the improvement in employment.

with job creation “high” rates in relation to GDP and labor costs slightly higher, the Bank of Spain projected decreases in the unemployment rate to stand “slightly above” 18 percent of the active population at the end of 2017 from nearly 21 percent now.

Among the components of domestic demand likely will moderate its support growth could lead to a slowdown in business investment recovery euro and the weakening of some foreign markets, as well as a moderation of growth in demand for public administrations in contrast to the increase in 2015

.