Country Economic Forecasts > Spain

The Spanish economy continues to slow gradually. Our estimates suggest that GDP rose 0.7% on the quarter in Q1, down from 0.8% in Q4 2015. Despite this, Spain remains one of the fastest-growing economies in the Eurozone; we expect expansion of 2.8% this year.Growth in the short term continues to be fuelled by strong tailwinds, namely the ECB's ultra-loose monetary policy and low oil prices, the latter particularly beneficial to Spain given its dependence on imported energy. As a result, the economy is growing at a robust pace, led by strong private consumption as households benefit from continued job creation and a boost to real disposable incomes from low inflation despite muted wage gains.But we expect growth to slow to 2.3% in 2017. The political situation is adding an element of risk, following the elections in December, which the ruling conservative Popular Party won but failed to gain a majority of seats. Although negotiations to form a government continue, it is unlikely that an agreement will be reached. If a government cannot be formed by 2 May, fresh elections will be called; this is now the most likely outcome. Although our central scenario does not see a radical shift in policy, the political impasse increases the chance of policy inaction, which would slow the recovery and add risks to fiscal sustainability.