The double political and economic break that Spain faces in the coming months

The double political and economic break that Spain faces in the coming months

The braking of Germany will rebound during this year in key national sectors such as automobiles and tourism

   The ministers of Economy and Finance, Nadia Calviño and María Jesús Montero, have not tired of repeating that the Spanish economy is "strong" and that it is growing "well above" the eurozone , in an attempt to dispel doubts about the slowdown that the experts confirm in their estimates. And although our economy has grown above 3% during the last three years, 2018 closed at 2.5% and the Government's own forecast for 2019 is 2.2%, although some experts lower it by one tenth.

  Both agree on the reasons: the weakening and threats of the economy and foreign trade. And it is not by throwing balls out, it is that the commercial tensions between the United States and China, the uncertainty that exists around the 'brexit' and the stop of the strong economies of the euro like Germany, Italy and France for their own internal political problems, They make the situation very unstable. Spain is saved, according to INE data, by the strong pull of domestic demand in recent months.

Thus, the consumption of families - whose saving rate is at historic lows - is overcoming a situation that could be worsened if international conflicts worsen and, above all, due to the lack of political stability that reduces investments in our country. country, due to the early announcement of elections.

Although some experts warn that the lack of government will weigh down the economy, S & P discards it

The professor of the ESADE Business School , Eugenio Recio, explains to this newspaper that the call for elections for the month of April and the regional, municipal and European elections in May provoke "a situation of uncertainty with serious economic consequences". The direct consequences will be, in his opinion, a decrease in the private investments of the Spaniards, but also by the foreign sector. "It is also possible that private consumption is reduced because in the face of uncertainty about how the economy will evolve, some will try to increase their savings to ensure their future," says Recio.

However, the rating agency Standard & Poor's (S & P) ruled out this week that the electoral advance was to ballast the Spanish economy in the short term and confirmed that the country will advance above the European average during "at least the next three years" . He said that Spain "is doing well despite the political stalemate", so he ruled out that this factor would affect growth. Last week Moody's also described as "limited" the effect that the period of "political uncertainty" linked to the call for elections will have on the country at an economic level.

Moreover, according to S & P it is likely that in the short term, the increase in pensions and public salaries, together with the failure to implement some measures to increase income due to the lack of new budgets, will "compensate for what would otherwise have been an fiscal cliff »as a result of the rejection of this year's accounts and" related delays in public state investment ".

How the German break affects
Germany has narrowly escaped the recession after a few days ago the figures for GDP growth in the fourth quarter of the year, which stagnated at 0.0% . Technically it avoids the recession after having registered a period of negative growth in the third quarter (-0.2%), which represents a significant setback with 2017 and a decrease in the estimates that had been made by different German and international organizations. Of course, in the whole of the year, Germany recorded a growth of 1.4%, one tenth less than initially expected, which is the weakest expansion rate since 2013 when only 0.5% of the largest power grew European and second largest client of Spain, only behind France.

Germany is the second customer in Spain and the "main" buyer of cars of the Spanish brand SEAT

Since then, everything had been positive data for the Germans, fulfilling the longest growth phase since 1966 . "If Germany entered into a recession it would affect even more than the 'brexit', but I do not believe that the German government will reach that point, it will take measures to stimulate the economy," Raymond Torres, director of Conjuncture and International Economy of FUNCAS .

Data published on the same day by Eurostat also confirmed that the eurozone economy grew by only 1.8% in 2018, its lowest advance since it left behind the crisis in 2014 and six tenths less than in 2017. The causes focus on the worsening economic situation in Germany and Italy, as well as the uncertain international context.

And in this context, Spain is the best unemployed country within the large economies of the euro, with an increase in GDP in the fourth quarter of 0.7% and 2.5% throughout the year, more than one point above of Germany and eight tenths higher than the average of the eurozone. "The stagnation of Germany is the biggest surprise of the evolution data of the European economy," says Torres. Above all, explains, because it is not known if it will be something temporary motivated by reasons such as the change of regulations in the automotive sector , or something structural because the 'European locomotive' lives on its exports and "affects it more than any other country" the global evolution. In addition, it is close to full employment, something very positive but that could diminish its capacity for growth.

Which sectors will be most affected by the German break? "Those that are more linked to the value chains of the German industry, which explains the drop in Spanish exports of automobiles last year (-4%) and engines (-35%)," says Torres. So far, Germany has been the main foreign buyer of the cars of the Spanish brand SEAT, says professor Eugenio Recio.

Even the tourism sector could be affected - in 2018 the entrance of Germans in Spain fell by 4% - because the slowdown in German domestic demand has repercussions on the group of goods and services imported by the country. This is a great concern for a sector such as tourism, on which Spain depends so much, because Germany is the third country that sends the most tourists a year.

In the total of our exports in 2018 is going backwards because until November we had exported to Germany worth 28,000 million euros, which is a drop of 0.7% compared to the same period last year in the one that had given a growth of 7.7%.

Savings rate, at minimum
Returning to the push that domestic demand means for the Spanish economy is not being so affected by the decline in exports as a result of the slowdown in Europe, the data offered by the Institute of Economic Studies (IEE) make some alarms jump. The savings rate of Spanish households will be, according to their analysis, at 5.1% in 2019, almost five points below the European average.

Thus, the savings rate in Spain will be far from 9.8% of the European average and 4.2 points below its own savings rate in 2014, which reached 9.3%. And although in all the countries of the EU its saving level has decreased since 2014 due to the improvement of the economy (from 11% five years ago to the 9.8% expected for 2019), in Spain it is much more acute. This fact could mean a lack of resources in the face of a more damaging situation in the economy, as may occur due to the weakening of the foreign sector, as mentioned in the text.

In fact, one of the countries with the highest family savings rate is Germany , with 17.2% expected for 2019, probably due to the lower confidence in its economy that leads citizens to take care of their expenses and save more . The same level will be in Sweden and followed by the Netherlands and Austria, both at 14%. Other countries whose economy is in a slowdown, such as Italy, also outperform the European average in their level of saving, in this case 10%.

Below the average, in addition to Spain, there are Ireland, Portugal, the United Kingdom or Poland, whose savings rate will be only 0.7% when in 2014 it stood at 2.3%.