Bank of Spain raises 2017 growth forecasts to 3.1%

It is forecast to be 2.5% in 2018 - also 0.3% higher than the forecasts published in April, and 2.2% in 2019.

The government forecasts for economic growth, however, stand at 2.7% for this year, below projections made by the majority of entities, and 2.5% in 2018.

"The improved GDP growth projections are underpinned by the better outlook for global markets, particularly over the short term, lower oil prices, and lower interest rates," said the bank.

A prolongation of the growth phase is predicted for the 2017-2019 period, based on three factors: the competitivity profit accumulated since the beginning of the recession, lower debt in the private sector and a continuation of these favourable financial conditions.

With regards to the relative weight of each of the GDP components it says growth will continue in line with domestic demand, which will nevertheless
keep slowing down as overseas demand continues to rise.

Projections for core inflation, which excludes prices of energy and fresh food, for all three years were maintained at 1.1 percent, 1.5 percent and 1.8 percent, respectively.

As for employment, the bank predicts a 16.5% unemployment rate for this year, dropping to 14.7% in 2018 and 13.2% in 2019.

"Employment will continue growing at a high rate, although this rate will gradually slow in the long term," said the bank

After a sharp rise in consumer prices (CPI) seen at the beginning of the year, inflation (IPC) is forecast to slow down over the rest of the year, giving an annual average in the region of 2% for 2017, dropping to 1.3% in 2018 and 1.6% in 2019.

Notwithstanding,  mention was also made of a number of factors like foreign trade, a possible increase in trade protectionism, a hypothetical tightening of global financial conditions and the uncertainty surrounding the Brexit process.

Photo: Bank of Spain, Madrid