How will the Catalonia crisis affect the Spanish economy

Spain's government divided over the consequences of the Catalonia crisis

Madrid (Reuters) - Spanish Prime Minister Mariano Rajoy warns of major economic consequences of the Catalonia crisis.

The forecast for growth in 2018 may have to be lowered again, said Rajoy on Thursday. "It concerns tourism, it concerns some institutions and it concerns trade." There are some worrying numbers. Economics minister Luis de Guindos said shortly after Rajo's statements that the government's recently lowered forecast already took into account the consequences of the conflict over independence aspirations in the affluent region. Should the situation improve in the next few weeks, a slight increase is even possible.

After the proclamation of the independence of Catalonia by the regional parliament, the central government had overturned the regional government there and scheduled new elections for December 21st. In addition, because of the crisis last month, it cut the forecast for economic growth in 2018 from 2.6 to 2.3 percent. The background to this is the uncertainty among companies, investors, consumers and tourists. Business in Spanish industry was still better in October than it has been for two and a half years. [NL8N1N82SY] Spain is one of the fastest growing economies in Europe. In the third quarter, the gross domestic product increased by 0.8 percent, while that of the euro zone rose by only 0.6 percent.

The EU Commission is still optimistic about Spain and expects gross domestic product to grow by 3.1 percent in 2017. For 2018, she raised the forecast slightly to 2.5 percent. The constitutional crisis surrounding Catalonia has hardly moved the markets so far. However, it is not yet possible to estimate how the conflict will play out in the coming years. [NL8N1NF6JK]

The Achilles heel of the fourth largest economy in the euro zone has recently been the labor market. Here, however, the situation should improve. The EU Commission expects the unemployment rate to decline to 14 percent by 2019 from a high of 26 percent in 2013.