The deceleration of Spain's economy is a clear fact and is happening faster than expected, according to several economists consulted by LPO this Wednesday after employment rates were released that caused concern. Specialists also warned that it would be difficult for the GDP to hit 2 percent growth in 2019.
According to information published by the Ministry of Labor, Migrations and Social Security, the number of unemployed people registered with the Spanish Public Employment Service (SEPE) increased by 13,907 individuals in September with respect to August - an increase that is seasonal in nature. The total number of unemployed people reached 307,711, translating into 122,798 people moving off unemployment lists in the last year.
For the time being, this progression shows growth in employment over the last year. Nevertheless, the most worrying piece of information is that social security gained only 3,224 enrollees in the last month. This means that job creation in September fell to its lowest level since 2013, when the Spanish economy was in recession.
"It has been a bit of a slap in the face. It has been worse than what we expected," remarked María Romero on the employment information that came out this Wednesday. Romero is a consultant on applied economics at AFI (International Financial Analysts, a Spanish firm).
The most affected sectors
According to Romero, the sectors most affected by the slowdown in job creation are the hospitality industry, trade, and transportation. On the other hand, industry in general has produced stronger figures than expected, bearing in mind that some analysts pointed to a downturn that ultimately did not take place.
Information from some sectors does follow with seasonal factors tied to the end of the summer tourist season. But Romero warns that the hospitality industry has been lagging in months other than September. What's more, statistics have barely begun to record the consequences of the Thomas Cook bankruptcy.
"We are gearing down from fourth to third," the economist stated to LPO. "This is a more intense deceleration, but growth is continuing. The outlook for Spain's economy is supported now in this third gear, with subdued growth."
Raymond Torres, Director of International Economics at FUNCAS notes, "the economic deceleration is a fact and will continue to intensify." According to the specialist, unemployment information confirms that, "the deceleration is already having repercussions in sectors such as the employment market."
In spite of this issue, Torres underscored that Spain's economy continues to grow at a higher rate than other European countries and is also still creating jobs. He did caution that families are opting to consume less and save more.
Economist María Arenales Serrano, who has held the positions of representative and senator for Partido Popular (PP) assured LPO that the employment slump is a direct consequence of the socialist government's policies, as well as the uncertain state of affairs Spain is currently facing.
"If there's one thing that's frightening, it's money. Businesses are not investing in Spain and that formerly translated into job creation," said Arenales Serrano. "Generating investment and employment activates the economy's virtuous circle," the PP economist added. "It has always been the case that leftist policies increase unemployment. The PSOE has jumped on the bandwagon," she noted, taking advantage of the momentum garnered by the "imbalance correction" carried out by PP's former administration, "but this is slowing down."
Two percent growth will be hard to come by
Due to the rate of deceleration, some economists warn that GDP growth will not be able to reach 2% in 2019 - a figure the acting government still hopes to surpass. "We are not going to grow more than 2% this year. My forecast is that the annual rate will end up somewhere between 1.5% and 2%," indicated Juan Laborda in an interview with LPO. Torres also thought it would "be difficult" to reach 2%.
The Banco de España lowered its estimates for growth for this year from 2.4% to 2%. A month ago, the acting head of the Spanish government, Pedro Sánchez said that Spain would see 2.2% growth in 2019 "with no trouble at all."
Minister Calviño's response
The acting Minister of Economy, Nadia Calviño recognized this Wednesday that there is a slowdown in the employment market, but also assured that there still are some dynamic elements.
"We are experiencing a slowdown in the job market, just as we are in our economy, but our employment, unemployment and enrollee information from social security confirms that Spain is riding this out better than other countries in the current context of international uncertainty," said Calviño after inaugurating the South Summit startup conference.
"We are still seeing features that are highly dynamic, which is the case with the job market," she stated.
Measures to adopt
Torres, Director of International Economics at FUNCAS thinks that improving expectations is fundamental. "We must try to improve confidence. A reform program and stable government would help."
Arenales Serrano also pointed to the importance of allaying local factors contributing to instability, such as a political blockade and the crisis in Cataluña. Laborda on the other hand, suggested avoiding mainstream economics. "Mainstream economics has failed in Europe. Spain experienced growth when Europe dropped fiscal restraints," he told LPO.
Translation: Jesse Tomlinson
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