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May 27, 2015

Moodys makes an optimistic forecasts of growth of Spanish economy

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The international rating agency Moody's predicts that Spain will grow by 2.7% in 2015, despite the political uncertainty in the country. It also foresees an economic growth of 2.2% for 2016.

The Spanish economy will continue to recover in the coming years due to increased domestic demand, according to Moody's, which expects growth of gross domestic product (GDP) will be 2.7% this year and 2.2 % in 2016, but warns that political situation "introduces elements of uncertainty."

However, this forecast is two tenths below the forecast made by Prime Minister Mariano Rajoy in April last year, which showed a growth of Spanish GDP by 2.9%. The Bank of Spain, meanwhile, raised its growth forecast to 2.8%, a tenth higher than the forecast of Moody's.

In addition, Moody 's has warned that the high level of public debt remains an obstacle to assess the rating of Spain is currently at the level of "Baa2" with a positive forecast, despite the improvements in financial conditions and economic of the country. "Private consumption and investment may become the main drivers of the economy, also felt the benefit of improved confidence, improved financing conditions and the labor market", – said the rating agency Moody's . Moody's also confident that the growth of exports of goods and services will accelerate in the coming years, although it believes that strengthening the Spanish economy will lead to a further increase of imports.

As a result of economic growth and growth of GDP, Moody 's expects an increase in government revenues, thus the reducing of budget deficit to 4.5% of GDP this year and to 3.5% next year. However, Moody's believes that the ratio of public debt in Spain will reach its peak in 2016 and even will exceed 100% of GDP before the situation can be stabilized, of course, with the condition of continued economic recovery and fiscal consolidation.

Moody 's agency also notes that "the unstable political situation in Spain introduces some elements of uncertainty" in the direction of politics in the coming years. In this connection, however, Moody's expects changes in economic policy, suggesting that it may be more difficult to take steps during the next legislature of the executive power. Therefore, the rating agency Moody's warned of a possible slowdown of reforms in Spain seen during the actual legislation.

 

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