Spain economy grows despite political impasse

The Times of India - 29.04.2016

The political stalemate that has left Spain without a government since unconclusive December elections hasn't damaged the economy as official data released Friday showed the economy expanded at a healthy pace in the first quarter.

Gross domestic product (GDP) expanded by 0.8 percent between January and March from the previous three months, matching the growth rate in the final two quarters of 2015, national statistics institute INE said in a preliminary estimate.

Spain's acting government predicts the economy will expand by 2.7 percent this year, then slow to 2.4 percent in 2017, according to new economic forecasts approved on Friday at a weekly cabinet meeting.

It sees the Spanish economy expanding by 2.5 percent in both 2018 and 2019.

On a year-on-year basis, Spain's GDP grew by 3.4 percent during the first quarter, a slight slowdown from the final three months of 2015 when it rose by 3.5 percent, it added.

Business leaders have warned that a prolonged political vacuum could hinder consumer spending and investment but the lack of a government has so far had a limited impact on the eurozone's fourth largest economy, which expanded by 3.2 percent last year.

The statistics institute did not provide a breakdown of what areas fuelled growth in the first quarter but economists say the economy continued to benefit from strong domestic demand.

"We do not see any sign of a significant drop in demand or investment and we expect this trend will continue in the coming months," said Miguel Cardoso, chief economist for Spain at BBVA bank.

Spain has been without a fully functioning government since the December 20 polls which resulted in a hung parliament with power divided among four main groupings, none of them with enough seats to govern alone.

The country is heading for its second general election in six months in June after King Felipe on Tuesday concluded that it would be impossible for parties to piece together a governing majority.

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