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Bank of Spain cuts growth forecasts on higher trade and political risks

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By Reuters
Bank of Spain cuts growth forecasts on higher trade and political risks
The metro station of Bank of Spain is seen in front of the Bank of Spain building in Madrid, Spain, May 22, 2018. REUTERS/Juan Medina   -   Copyright  JUAN MEDINA(Reuters)

MADRID, (Reuters) – A slowdown in Spain’s main export markets, concerns over potential global trade disputes, a fragmented parliament and uncertainty over Catalonia prompted the Bank of Spain to cut growth forecasts to 2020 on Tuesday.

The central bank saw the Spanish economy growing by 2.6 percent this year, down from a previous forecast of 2.7 percent, and expected that to slow to 2.0 percent by 2020, down slightly from its previous predictions in June.

“This is a consequence, primarily, of the worsening perspectives in the evolution of Spain’s exports markets and, to a lesser extent, rising oil prices,” the bank said in its quarterly report.

External risks to Spanish growth, which has held above the European average since a five-year economic slump from 2008 to 2013, also included a shift toward protectionist trade practices by countries such as the United States, it said.

Domestically, continued political uncertainty over the region of Catalonia, which has been pushing for independence since an illegal referendum in 2017, and a fragmented parliament, pose the main growth risks, it said.

The ruling Socialist party has 84 seats in a 350-seat parliament and is struggling to find a majority for next year’s budget.