PM Previsions Macroeconòmiques Macroeconomic scenario for the Catalan economy. 2019 and 2020 - Gencat
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PM Previsions Macroeconòmiques Macroeconomic scenario for the Catalan economy. 2019 and 2020 June 2019
Previsions Macroeconòmiques Macroeconomic scenario for the Catalan economy. 2019 and 2020 June 2019 ISSN: 2013-2182 © Government of Catalonia. Ministry of the Vice- Presidency and of the Economy and Finance This work is subject to an Attribution-NonCommercial- Noderivs Creative Commons license. License summary: http://creativecommons.org/licenses/by-nc-nd/3.0 Full license: http://creativecommons.org/licenses/by-nc-nd/ Edited by Directorate General for Economic Analysis Rambla Catalunya, 19-21 08007 Barcelona http://economia.gencat.cat Graphic design Enric Jardí
The economic environment
The world economy moderated its growth in 2018. Growth stood at
3.6%, which was 2 decimal points less than in 2017, when it reached its
highest point since 2011. The International Monetary Fund forecasts
that the slowdown will continue in 2019 and that the GDP will increase
by 3.3% and later pick up again by 3.6% in 2020.
The slowdown in 2019 is mainly due to moderation in the pace of
growth of advanced economies, whose GDP will increase by 1.8%,
which is 4 decimal points less than in 2018. Emerging and developing
economies are also less dynamic, but to a lesser extent and with higher
rates of growth, 4.4% in 2019, 1 decimal point less than the previous
year.
GDP development (annual change, %)
6
5
4
3
2
1
0
-1
2013 2014 2015 2016 2017 2018 2019 (f) 2020 (f)
World Advanced economies Euro area Emerging and developing economies
Source: IMF (April 2019).
There is a widespread loss of dynamism in advanced economies,
according to IMF forecasts. The economy of the USA is expected to
slow its growth from 2.9% in 2018 to 2.3% in 2019. In any case, the
advanced data from the first quarter of this year continue to show high
and growing dynamism. The expected moderation in the rate of growth
is due to interest rate hikes until late 2018, trade tensions with China,
the federal government shutdown and the subsiding impact of the
expansive fiscal measures of 2017. Moreover, the Eurozone will slow
down in 2019 and the GDP will grow by 1.3%, half a point less than in
2018. This moderation is especially notable in the largest Eurozone
economies due to global commercial tensions, as well as adaptation to
3 Previsions Macroeconòmiques June 2019normative changes in terms of emissions in Germany, political
instability in Italy and social conflicts in France. Uncertainties linked
to the outcome of Brexit must also be considered. The European
Commission predicts that adjustment in the Eurozone will be a little
tighter; GDP growth for 2019 is expected to be 1.2%, which is 7 decimal
points less than in 2018.
With regard to emerging and developing economies, the most
significant moderation due to its relative importance is that of China,
which fell from 6.6% growth in 2018 to 6.3% in 2019, according to IMF
forecasts the lowest growth in three decades. This trend is mainly
explained by the slowdown in recent years and trade tensions with the
USA. By contrast, the pace of economic growth in India continues to
accelerate, spurred on by fiscal and monetary policies. The GDP in
Latin America will grow by 1.4% in 2019 thanks to the recovery in
Brazil. Developing European countries are slowing down their rate of
growth (with only a 0.8% increase in 2019) due to the downturn in
Turkey.
Commercial tensions give reason for concern on a global level, but
trade is expected to continue growing, though at more moderate rates
(3.4% in 2019). Even though the latest available data show an increase
in oil prices, the IMF expects them to drop during 2019. In any case,
there are many uncertainties calling for prudence regarding these
forecasts.
Forecasts for the international economy
(annual change, %)
GDP 2018 2019 (f) 2020 (f)
World economy 3.6 3.3 3.6
Advanced economies 2.2 1.8 1.7
Emerging and developing economies 4.5 4.4 4.8
Euro Area 1.8 1.3 1.5
USA 2.9 2.3 1.9
Japan 0.8 1.0 0.5
China 6.6 6.3 6.1
India 7.1 7.3 7.5
Russia 2.3 1.6 1.7
Brazil 1.1 2.1 2.5
World trade of goods and services
3.8 3.4 3.9
(volume)
Oil price (in USD) 68.3 59.2 59.0
(f) Forecast
Source: IMF (April 2019)
4 Previsions Macroeconòmiques June 2019In the Eurozone as a whole, moderation in 2019 is so widespread that
the European Commission expects that only the GDP of Greece will
grow above its GDP in 2018. Growth rates and the significance of the
slowdowns are different across countries. It must be borne in mind
that these forecasts are framed within a context of expansive monetary
policy, with rates around 0% for main financing operations, 0.25% for
the marginal lending facility rate, and -0.40% for the deposit facility
rate. The European Central Bank is also expected to take new steps to
promote the availability of financing throughout 2019.
GDP forecasts for Euro Area countries
(annual change, %)
2018 2019 (f) 2020 (f)
Germany 1.4 0.5 1.5
France 1.6 1.3 1.5
Italy 0.9 0.1 0.7
Spain 2.6 2.1 1.9
Netherlands 2.7 1.6 1.6
Belgium 1.4 1.2 1.2
Austria 2.7 1.5 1.6
Greece 1.9 2.2 2.2
Portugal 2.1 1.7 1.7
Ireland 6.7 3.8 3.4
Finland 2.3 1.6 1.2
Slovakia 4.1 3.8 3.4
Lithuania 3.4 2.7 2.4
Slovenia 4.5 3.1 2.8
Luxembourg 2.6 2.5 2.6
Latvia 4.8 3.1 2.8
Estonia 3.9 2.8 2.4
Cyprus 3.9 3.1 2.7
Malta 6.6 5.5 4.8
Euro Area 1.9 1.2 1.5
European Union 2.0 1.4 1.6
(f) Forecast.
Source: European Comission (April 2019)
The economic forecasts for Spain are more optimistic than for the
entire Eurozone both for 2019 and 2020. There is much agreement
about growth rates this year, situated at 2.2% according to the Spanish
Ministry of Economy and Business and the Bank of Spain and at 2.1%
according to the International Monetary Fund and the European
Commission. All four institutions agree that Spain’s GDP will grow by
1.9% in 2020. Thus, Spain’s economic dynamism will remain relatively
high, but a moderate slowdown will occur.
5 Previsions Macroeconòmiques June 2019Forecasts for the Spanish economy
(annual GDP change, %)
2018 2019 (f) 2020 (f)
Ministry of Economy, Industry and
2.6 2.2 1.9
Competitiveness (April 2019)
Bank of Spain (March 2019) 2.5 2.2 1.9
IMF (April 2019) 2.5 2.1 1.9
European Comission (April 2019) 2.6 2.1 1.9
(f) Forecast
Source: INE, Ministry of Economy, Industry and Competitiveness, Bank of Spain, IMF and European
Comission.
The Spanish Ministry of Economy and Business expects the GDP
growth to be 4 decimal points lower in 2019 (2.2%) and to further slow
down by 2020 (1.9%). On the one hand, domestic demand will
continue to drive growth, but at a slower pace. Private spending and
public spending will fall off slightly while investment will weaken more
intensively, despite being the most dynamic component. On the other
hand, the contribution of foreign demand will remain negative in 2019
(-0.1%) and achieve equilibrium by 2020.
This economic growth will enable job creation to continue, though at
more moderate rates than in previous years, so unemployment rates
will continue to fall. With regard to prices, the Ministry expects higher
inflation at 1.6% in 2019, which is 6 decimal points more than in 2018.
Productivity per hour worked will continue to decline (-0.4% in both
2019 and 2020), while wages are expected to rise by more than 2%, so
that the unit labour cost will grow by 1.9% in 2019 and 2% in 2020.
Macroeconomic scenario for the Spanish economy
2018 2019 (f) 2020 (f)
GDP % change in volume 2.6 2.2 1.9
Domestic demand Contribution to the GDP growth 2.8 2.3 1.9
Household consumer expenditure % change in volume 2.3 1.9 1.6
Public administration
% change in volume 2.1 1.9 1.5
consumer expenditure
Gross capital formation % change in volume 5.3 4.0 3.5
External balance Contribution to the GDP growth -0.3 -0.1 0.0
Exports of goods and services % change in volume 2.3 2.7 2.8
Imports of goods and services % change in volume 3.5 3.1 2.9
1
Jobs created % change 2.5 2.1 1.8
Estimated unemployment rate Unemployed / active pop. (%) 15.3 13.8 12.3
(f) Forecast.
1
Full-time equivalent jobs.
Source: Spanish government. Ministry of Economy and Bussiness (April 2019).
6 Previsions Macroeconòmiques June 2019Forecasts for the Catalan economy In 2018, the Catalan economy extended the expansive phase begun in 2014 for the fifth consecutive year. The GDP grew by 2.6%, which was 8 decimal points less than the previous year, amidst a gradual slowdown in activity worldwide. Quarterly growth in 2018 showed a downturn, from 3.3% year-on-year in the first quarter to 1.8% in the fourth quarter. In the first quarter of the year, the Catalan economy grew by 2%, with signs of stabilisation after the steady loss of dynamism during 2018. This moderation of activity came amidst a less favourable international environment, especially in the second half of 2018, with a special impact on the Catalan economy’s foreign demand. Foreign demand contributed 0.4 percentage points to GDP growth in 2018, half of what it did in 2017. The contribution of the foreign trade balance dipped into the red in 2018 (-0.4 points) while that of the balance with the rest of Spain held at a notable level (0.8 points). The decline in foreign trade flows reflects slower growth in exports of goods and services (2%), the least since 2009. Imports also fell (3.6%), but to a lesser extent than exports. Domestic demand also contributed less to growth in 2018 (2.2 percentage points). A component-based analysis indicates a general slowdown, but gentler than that of external demand. Household spending and public administration consumer expenditure fell to 2% and 1.9%, respectively, while gross capital formation continued to rise fairly high (4.6%), with slightly more dynamism in investment in capital goods than in investment in construction. Current forecasts predict that the growth of the Catalan economy will stabilise at around 2%, specifically a GDP growth rate of 2.2% in 2019 and 1.9% in 2020. We are entering into a more mature phase of the economic cycle, in which the growth of the Catalan economy is converging towards its potential or long-term value. In this sense, the latest estimates of the Ministry of Economy and Business place the Spanish economy’s potential rate of growth at 1.8%. This moderation of growth in 2019 is shared with our immediate environment, with forecasts slightly over 2% for the Spanish economy (2.2% in particular) and quite a bit lower for the Eurozone average (1.2%). In line with analyses by the main international organisations, this macroeconomic scenario is subject to external downside risks. The persistent moderation in growth in the Eurozone, the escalation of commercial 7 Previsions Macroeconòmiques June 2019
protectionism and the uncertainties surrounding the outcome of Brexit
are elements that have given some respite in the first months of 2019,
but that can threaten the robustness of the current expansive phase at
any time.
The contribution of external demand is expected to remain positive in
2019, though less so (0.3 points), thanks to the positive balance with
the rest of Spain (of 0.4 points), which offsets the slightly moderate
contribution of the foreign balance (-0.1 points). These projections
reflect less dynamism in foreign exports than in imports (with
increases of 2.8% and 3.6%, respectively), but also reveal a certain
acceleration compared to exports’ weakness in 2018.
Macroeconomic forecasts for Catalonia
2018 2019 (f) 2020 (f)
GDP % change in volume 2.6 2.2 1.9
GDP Millions of euros 242,323 251,259 260,988
Domestic demand Contribution to the GDP growth 2.2 1.9 1.7
Houshold consumer expenditure % change in volume 2.0 1.9 1.6
Public administration
% change in volume 1.9 1.8 1.7
consumer expenditure 1
Gross capital formation 2 % change in volume 4.6 3.0 2.9
External trade balance Contribution to the GDP growth 0.4 0.3 0.3
Foreign trade balance Contribution to the GDP growth -0.4 -0.1 0.1
Exports of goods and services % change in volume 2.0 2.8 3.5
Imports of goods and services % change in volume 3.6 3.6 3.8
Balance with the rest of Spain Contribution to the GDP growth 0.8 0.4 0.2
3
Jobs created Thousands 107.0 59.3 37.9
3
Jobs created % change 3.4 1.8 1.1
Estimated unemployment rate Unemployed / active population (%) 11.5 10.2 9.5
(f) Forecast.
1
Includes consumption expenditure of non-profit institutions serving households.
2
Includes stock variation.
3
Full time equivalent jobs.
Source: Catalan Government. Ministry of the Vice-presidency and of the Economy and Finance.
Growth in 2019 will therefore continue to be driven by domestic
demand, with a general slowdown in all components, particularly gross
capital formation, though it will remain at notable rates. Household
spending and public administration consumer expenditure are
increasing at a similar pace, 1.9% and 1.8%, respectively. Gross capital
formation has also slowed its growth, to 3%, amidst a clearly weak final
demand and the effects of worldwide uncertainty about companies’
investment plans. Nevertheless, the dynamism of employment and
wages, conditions that promote financing and a healthier situation for
companies and households, which have undergone deleveraging in
8 Previsions Macroeconòmiques June 2019recent years, give rise to cautious optimism regarding prospects for investment, both in capital goods and construction assets. For 2020, the Catalan economy will maintain this pattern of moderate growth, with a GDP growth rate of 1.9%. The differences in the composition of the growth compared to the previous year are unremarkable, since a very gentle slowdown is expected for most components, in line with a more mature phase of the economic cycle. However, the expected rise in exports of goods and services, up to 3.5%, will lead to improvement in the foreign trade balance (by 2 decimal points, bringing it up to 0.1 points). The projections for gross capital formation continue to show more balanced composition than in the previous expansive phase, with similar growth of investment in capital goods and investment in construction assets. The gentle downturn in the macroeconomic scenario warrants moderate optimism about job creation. After three years of robust job creation, the equivalent of around 100,000 full-time jobs each year, at rates above 3% (3.4% in 2018), more moderate growth rates are predicted, 1.8% in 2019 and 1.1% in 2020. In conjunction with active population growth at around 0.7%, these employment dynamics are causing a steady decline in the unemployment rate, pushing it down to 10.2% in 2019 and 9.5% in 2020. 9 Previsions Macroeconòmiques June 2019
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