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Bank of Spain Boosts Growth Forecast, Warns on Global Risks

Bank of Spain Boosts Growth Forecast, Warns on Global Risks

(Bloomberg) -- Spain’s central bank boosted its forecast for economic growth this year, but echoed warnings that risks including trade tensions and Brexit have intensified in recent months.

The Bank of Spain sees growth reaching 2.4% this year, up from 2.2% previously. That’s double the rate of expansion expected in the 19-country euro zone this year.

The upgrade, partly reflecting the strong performance in the first quarter, is rare good news for the euro-area economy, where a gloomy outlook has pushed the European Central Bank to pledge it will keep interest rates at a record low for even longer.

Spanish growth will come in at 0.6% this quarter, 0.1 percentage point higher than anticipated in March and close to the 0.7% pace seen at the start of the year.

“The Spanish economy has continued to show remarkable strength,” Bank of Spain economists wrote in a report published on Friday.

They say consumer spending will continue to power growth, buoyed in part by wages that are expected to increase by more than 2% each year through 2021. Job growth will slow, though the bank expects the unemployment rate to fall to around 12% in 2021 from 14.7% now.

However, external risks are rising after U.S. President Donald Trump threatened tariffs against Mexico, and the probability of a disorderly Brexit appears to have increased, the bank’s economists said.

While tensions surrounding Italy’s fiscal situation have been so far contained, there’s still a risk that the uncertainty “ends up impacting other economies in the euro area.”

To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Charles Penty

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