Analysis | Time for new impulses reformers

The new Government is an international scene, overshadowed by the multiplication of trade wars, the weakening of multilateralism and the flows of productive inv

Analysis | Time for new impulses reformers

The new Government is an international scene, overshadowed by the multiplication of trade wars, the weakening of multilateralism and the flows of productive investment and the collapse of the industry. And do not anticipate a rapid improvement in the coming months, so that our prospects of growth, though still favourable in comparison with the rest of Europe, will be constrained for some time.

The calls to a greater role of public budgets in the reactivation of the european economy have been ignored except, paradoxically, in countries that initially had less margin as France. Macron has responded to social unrest with more spending and tax cuts, worsening the public deficit to bring it to the threshold of 3% of GDP. Your Finance minister has already announced measures for containment. Nor the surplus countries want to take over France, nor the public purse can european afford it in the short term, in the absence of further realization of the promises of Von der Leyen with respect to the creation of a european mechanism to be counter-cyclical.

on the other hand, the hypothetical agreement in the making between the US and China will not close the struggle geopolitics between the first two powers. The pressures of Washington will remain until at least to see a change in the productive model driven by Beijing, based on the intervention, the support of exports and the desire of domination in technology. The international trade suffers from the climbing tariff. The volume of international trade increased at an annual rate of around 1.5% (according to World Bank estimates), three times less than during the recovery period. A stalemate that has consequences on foreign direct investment, according to the recent report of the World Bank. The entry of productive capital in our country reached until October 9.800 million euros, in the quarter a year earlier.

In Spain and France the industry

resists better than in Germany

Index of industrial production, rates

year-on-year. Corrected data from calendar

and seasonal

France

Germany

Spain

5

4

3

2

1

0

-1

-2

-3

-4

-5

-6

1,1

0,7

-5,1

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

O.-N.

2018

2019

services moderate

slightly its growth

PMI services, in index

France

Germany

Spain

58

56

54

52

50

48

53,6

52,5

52,1

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

IV T.

2018

2019

Sources: Ministry of Economy,

Markit Economics and Funcas.

THE COUNTRY

In Spain and France the industry

resists better than in Germany

Index of industrial production, in rates year-on-year.

Data adjusted for calendar and seasonality

5

4

3

2

1

0

-1

-2

-3

-4

-5

-6

France

Germany

Spain

1,1

0,7

-5,1

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

O.-N.

2018

2019

services moderate

slightly its growth

PMI services, in index

58

56

54

52

50

48

France

Germany

Spain

53,6

52,5

52,1

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

IV T.

2018

2019

Sources: Ministry of Economy,

Markit Economics and Funcas.

THE COUNTRY

In Spain and France the industry

resists better than in Germany

services moderate

slightly its growth

Index of industrial production, rates

year-on-year. Corrected data

of calendar and seasonality

PMI services index

France

Germany

Spain

France

Germany

Spain

5

4

3

2

1

0

-1

-2

-3

-4

-5

-6

58

56

54

52

50

48

1,1

53,6

0,7

52,5

52,1

-5,1

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

IV T.

I T.

II T.

III T.

O.-N.

2018

2019

2018

2019

Sources: Ministry of Economy, Markit Economics and Funcas.

THE COUNTRY

on the other hand, expected a rebound of the industry, after a period of decline as a result of the slowing world and of adapting to the demands of the fight against climate change. However, the indicators show a fall with prolonged activity. In Spain, the sector holds somewhat better than in the rest of Europe, but the industrial production barely moves. The surprising spike in the production of capital goods is not sufficient to offset the decline in the automotive sector.

it Is the monetary policy, an instrument that is already overloaded because interest rates can hardly go lower, and the measures of reactivation of credit are facing a lawsuit the ailing. However, it is expected that its effects will leave a notice in the european economy in the short term.

The labor market is another pillar of the expansion. Despite the slowdown, is still created employment and wages elsewhere, both in our country and in the rest of Europe, holding the income of households and the consumption expenditure. It is estimated that the disposable income of Spanish households has increased by 25,000 million in 2019, almost the same as the total of France and Italy (in Germany the increase amounted to 75,000).

But the main factor that justifies a moderate optimism is the financial situation is relatively healthy in the european private sector (though with worrying increases in corporate debt high-risk), as well as a productive fabric reactive to the recovery of the global economy, when this occurs. This is precisely what they anticipate the major international agencies, from the second part of the year.

all in all, the Spanish economy could grow by around 1.5% this year, still half a point higher than the european average, before regaining some momentum in 2021. A result which, however, obliges us to a new momentum of reform, given the persistence of significant economic and social imbalances.

Raymond Torres is the director of the conjuncture of Funcas. On Twitter: @RaymondTorres_

Debt

This week the Treasury issued public debt in favorable conditions, without major changes with respect to previous operations. Bonds with maturities three years and were placed at interest rates negative (-0,391 and -0,103%, respectively, values close to the previous auction). In the case of obligations with maturities to 15 years, the interest rate was also maintained at low levels (below 0.9%, two tenths above that of the auction of November). In the secondary markets, the differential with the German bond (risk premium) remains at low levels.

Updated Date: 12 January 2020, 15:00

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