Two separate reports – from the Bank of Spain and Madrid-based lender BBVA – show a significant slowdown in the Catalan economy stemming from last year’s attempt to separate from Spain, as political turmoil hit investment, tourism, and consumer spending.
Kristian Rouz — Last year’s push for independence from Spain has taken its toll on the Catalan economy. One of the most industrialized parts of the country, and an attractive tourist destination, Catalonia is now facing a decline in investor sentiment and private-sector spending, whilst overall the Spanish economy is gaining momentum.
According to a report from the Bank of Spain (BoS), the nation’s GDP rose 0.8 percent in a quarter to quarter comparison, but could drop towards a hazardous stagnation if political woes in Catalonia continue into this year.
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The BoS said the pace of economic growth was unchanged last quarter from the previous period, and down from 0.9 percent in Q2. The BoS points to the harm dealt by Catalan attempts at secession to such industries as tourism, retail and broader commerce, as well as real estate.
“According to this information, the economic activity in Catalonia will have slowed more in the last part of the year than in other regions considered. This slowdown is due in particular to the poor performance of employment, tourism and property market indicators, among others,” the BoS said in a statement.
A separate report from BBVA Research — an economic analysis branch of the Madrid-based bank — the economy of Catalonia weakened due to a slump in consumer spending last year. Therefore, the researchers say, the Catalan GDP will grow 2.1 percent this year, compared to 2.5 percent expected for the whole of Spain.
BBVA said Catalan economic growth will be below the average of the past three years in the first half of this year.
Meanwhile, the BoS says a relief in political tensions in Catalonia could spur the region’s economic growth by encouraging private sector spending — as businesses will seek to make up for the forced pause in investment in the second half of the past year.
“On the other hand, a hypothetical resurgence of the tensions in the next few months could lead to a more pronounced impact on consumer and investor choices than inferred by the data available,” the BoS said.
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The central bank had also said previously the Catalan turmoil might cost the national economy between 0.3 and 2.5 percent of GDP over the next two years, which would mean a loss of three to 27 billion euros.
This comes as Catalonia prepares to elect its new leader, who will determine subsequent political developments. The leader of last year’s push for independence — Carles Puigdemont — is now in Belgium, as he claims the Spanish authorities might seek to arrest him.
BBVA said the key question is who forms the new Catalan administration. If the new leader opts to take the standoff with Madrid further, severe economic consequences for Catalonia and slower growth for Spain as a whole is a likely scenario.
BBVA also downgraded its economic growth forecast for Spain back in November, from 2.8 percent down to 2.5 percent this year. Last year, BBVA said, the Spanish economy expanded by 3.1 percent — also below previous projections.