Bank Of Spain Warns Catalonia Faces Recession Risk

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Spain’s central bank notify Catalonia that they are risking recession if the crisis over its separation drive goes on.

A “serious and lengthen” crisis would crash the Catalan economy into recession for the most part of the time between the end of this year and 2019, the Bank of Spain stated this in its latest economic bulletin.

Such a decline in economy would cause a collective decrease of 2.5 percentage points in Spain’s gross domestic product (GDP) during this period, it added

Under a more cheerful framework, with only a temporary period of doubt in the fourth quarter of this year due to the Catalan crisis, the bank predicts Spain’s economic growth would be lowered by 0.3 percentage points during this time.

But the bank left its extension forecast for Spain, the euro zone’s fourth largest economy, unchanged for this year and the next.

It sees the economy increasing by 3.1 percent this year and by 2.5 percent next year.

Spain central government is keeping its 3.1 percent growth prediction for 2017, but it has already lowered its point of view for for next year to 2.3 percent from 2.6 percent due to “uncertainty” sparked by the crises in Catalonia.

“In the case of families, a loss of belief concerning the future could cause them to commit a bigger percentage of their revenue to savings as a precaution,” the central bank said

Read also: Spanish PM Threatens To Take Control Of Catalonia

Uncertainty about Catalonia’s future has give rise to almost 2,000 banks, operating in several countries and mid-size companies to move their legal headquarters outside the region.

Catalonia, population of 7.5 million people with is own distinct language and culture in the region bordering France, produced about one-fifth of Spain’s economic product

As a separate country its gross domestic product would be as big as that of Portugal or Finland.

Spain is one of the fastest growing countries in the euro zone, recording an expansion of 3.4 percent in 2015 and 3.3 percent in 2016, double the average of the member states of the single currency alliance.

 

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