Spanish economic growth forecast to slow to 2.5% in 2016

Spanish economic growth is expected to have slightly slowed in Q4 to 0.7% q/q, as compared with economic growth of 0.8% q/q in Q3. Even if Spain's economy is amongst the strongest in the euro zone, it has passed its peak. Domestic demand, mainly consumption, has mostly driven the economic growth, advancing from tax cuts, lower oil prices, rebound in labor market and improved financial conditions.

"Looking ahead, we expect further deceleration, with growth slowing to 2.5% in 2016 from 3.2% in 2015. The expected pick-up in inflation and moderation in labour market improvements will weigh on real disposable income", says Societe Generale.

The nation's exports are likely to remain strong, while imports are expected to slow down. Net trade's contribution to the economic growth is likely to be neutral after a small drag in 2015. Meanwhile, the political stalemate and uncertainty might be a slight drag on certain businesses' hiring and investment decisions.