It appears that the global economic slowdown is now a fact. The IMF has been forced to cut world growth forecasts by two tenths of a per cent for 2016, leaving them at 3.2%. We are faced with a backdrop of volatile financial markets and somewhat lethargic international trade.
The oil crisis is directly affecting emerging markets and their growth, deepening recessions such as that of Brazil, which could have a knock-on effect on the rest of Latin America. The economic slowdown in China has unnerved the rest of the world and, though it has recently improved slightly, the halt in consumption is worrying.
Meanwhile, in the Eurozone these concerns appear to have further affected the outlook of emerging economies. The financial instability seen at the beginning of the year and the economic information at hand, point to lower growth for the first quarter than previously forecast a few months ago.
The outlook in the medium term seems to indicate a gradual recovery, with monetary policy continuing to show signs of expanding. In addition, the recent worsening of the international geopolitical scenario and the increase in uncertainty of the changes to the Eurozone economy suggest that these forecasts could be subject to a downturn.
Though growth in Spain is expected to slow in the coming years, lowering the strong position it currently holds in the Eurozone, and the unemployment rate remains high at around 20%, it continues to drive growth. This year Spain will be the developed economy with the highest growth this year, even ahead of the United States. GDP will increase by 2.7%. And although the IMF has reduced its growth forecasts for all the main economies, Spain has seen the lowest adjustments, just one tenth of a per cent. It is worth noting that private consumption and residential construction are the two areas in which the greatest growth is forecast.
Nevertheless, political uncertainty continues to cast a shadow over Spain’s future. This is one of the factors of most concern to the IMF, in particular if this situation continues to drag out over time.
Madrid grew by 3.4% in 2015, with the service sector being one of the main drivers, in which there was increased job creation, while the construction sector also saw a considerable improvement growing by more than 4%.
The improvement in GDP has been driven by good household and business spending, which has, among other factors, improved financial terms and conditions. Household income in particular has been bolstered by the fall in oil prices, the increase in employment and, to a lesser extent, the introduction of various budgetary measures.
In terms of the job market, the increase in the number of workers affiliated to Social Security suggests that employment levels will continue to grow as in 2015. There has been a considerable fall in the unemployment rate in Community of Madrid, where it currently stands at 16.5%.
In terms of prices, the CPI is expected to fall to 0.1% in 2016. The first months of the year have seen the CPI return to negative year-on-year levels.
The Euribor is at an all time low, the Consumer Price Index and inflation have remained flat and the unchanging market activity rate in 2015, all contribute to a scenario that supports the continued recovery of the residential market in the medium-term.