Spain posts brisk growth but Catalonia impact yet to come
Spain notched up vigorous growth in the third quarter, official data showed Monday, but economists and business groups warned the crisis in wealthy Catalonia could impact the economy.
Spain's gross domestic product (GDP) expanded by 0.8 percent in the period from July to September, the national statistics institute INE calculated in a preliminary estimate.
That carries on from strong growth of 0.9 percent in the second quarter and 0.8 percent in the first quarter, as the Spanish economy enjoys robust consumer demand, a tourism boom and buoyant export demand.
The data do not, however, take into account any economic fallout from the crisis in Spain that has ensued since the Catalan government held an outlawed independence referendum on October 1.
After weeks of uncertainty, Catalonia's parliament declared independence on Friday, and the central government subsequently imposed direct rule on the semi-autonomous region in a bid to end Spain's worst crisis in decades.
- Investment, consumption, jobs -
For now, the government is maintaining its 3.1 percent growth forecast for 2017, but it has already downgraded its outlook for 2018 to 2.3 percent from 2.6 percent due to "uncertainty" sparked by the situation in Catalonia.
Economy Minister Luis de Guindos said Monday there had been a "brake on decisions to invest and on consumption, and a credit contraction" in October.
Catalonia is one of the economic powerhouses of Spain along with Madrid, contributing to 19 percent of national GDP and representing 16 percent of the overall population.
By far Spain's top exporting region, it has big food, chemical, automotive and logistics sectors.
The region is also the most visited in Spain, with some 18 million people taking a trip there from abroad in 2016, attracted by the Mediterranean city of Barcelona or the Costa Brava beaches.
But tourism in the region has already taken a hit from the crisis.
In the first two weeks of October, the sector saw its turnover fall 15 percent compared to the same time last year, and reservations until the end of the year are down 20 percent, according to industry lobby group Exceltur.
"It's very likely that there has also been intense job destruction in the hotel sector," an industry where many waiters and room attendants are employed on temporary contracts, said economist Jose Carlos Diez.
A report by Barcelona's chamber of commerce adds that stores in the centre of Barcelona, where there have been numerous pro- and anti-independence protests, "complain about a drop in sales."
The chamber warns of consequences "in the medium-term on investment, consumption and jobs."
Another major area of concern is the departure of more than 1,800 companies who have moved their legal headquarters out of Catalonia since October 1, including the banks CaixaBank and Banco Sabadell, energy group Gas Natural and motorway giant Abertis.
- 'Temporary setback' -
The companies have only moved their fiscal domicile out of the region, not their employees. But both the heads of CaixaBank and Sabadell have said these moves are "not temporary".
Catalonia's main employers' association Foment del Treball fears that some companies may gradually transfer "goods and services made in Catalonia to the new headquarters".
"Sometimes, it takes time for these types of decisions to produce an effect," Enrique Sanchez, head of staffing multinational Adecco in Spain, told financial daily Expansion Monday.
But he added that uncertainty "will definitely destroy jobs in Catalonia in the medium term."
Ratings agency S&P Global has gone even further, warning the region could plunge into recession.
The impact on the rest of Spain will depend on the length of the crisis, most analysts say.
Prime Minister Mariano Rajoy on Friday called regional elections for December 21 in a bid to "restore normality."
Holger Schmieding, an analyst at Berenberg Bank, said that after 16 consecutive quarters of growth, "Spain can weather a temporary setback."