Catalonia Main Risk to Spain Growth

The political situation in Catalonia is one of the main domestic risks to the economy due to uncertainty over the development of tension between Barcelona and Madrid, the Bank of Spain said on Tuesday, Reuters reported. While a significant rise in economic uncertainty in the last few months of 2017 due to political tensions, during which thousands of companies moved their legal headquarters out of the region, was transitory, concerns remain, it said. “In the short and medium term, the final effect of this risk element on the whole of the economy will depend on the magnitude and persistence of this episode of political uncertainty,” the bank said in its annual report. The central bank also noted that a weaker tourist sector—which accounts for around 11% of Spanish GDP—a strengthening euro and oil price rises point to more modest growth expectations. The Bank of Spain sees the economy expanding 2.7% this year after 3.1% in 2017. In the medium term, the bank noted it saw potential growth at below 1.5% with structural limits including high unemployment, an aging population, reduced productivity and limited competitiveness.