Country Economic Forecasts > Spain

The economy is proving resilient, with GDP expanding a robust 0.8% on the quarter in Q1, the same as in both Q3 and Q4 2015. Growth in the short term continues to be fuelled by the ultra-loose monetary policy of the ECB and low oil prices, the latter particularly beneficial to Spain given its dependence on imported energy. As a result, private consumption remains solid as households benefit from strong levels of job creation and a boost to real disposable income from low inflation. But exports have slowed recently due to weaker global trade, although Spain continues to outperform most of its European peers.The fiscal situation is also an increasing cause for concern. Following the fiscal miss in 2015, the EC has granted Spain additional time to bring its deficit down below the 3% threshold, but additional budget cuts will be necessary.We expect growth of 2.9% this year, before moderating to 2.2% in 2017. But the political situation remains uncertain, with fresh elections due on 26 June. Although our central scenario does not see a radical shift in policy, the ongoing political impasse increases the risk of policy inaction, which could slow the recovery and undermine fiscal sustainability over the long term.