MADRID, Dec 16 — Spain’s economic growth is likely to gradually slow down between 2019 and 2022 due to lower consumption and weaker business investment, the central bank said today.

In its economic outlook for 2019-2022, the central bank expected GDP to grow 1.7 per cent next year and 1.6 per cent in 2021 – unchanged from its previous forecasts.

It said that in the fourth quarter, the economy should expand at a pace of around 0.4 per cent, in line with the third quarter.

Spain’s economy – the euro zone’s fourth largest – has consistently outperformed much of Europe since it emerged from a five-year slump in 2013, and the 2019 forecast of 2 per cent growth still points to a growth well above the projected 1.2 per cent growth rate for the currency bloc.

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But the Bank of Spain warned: “It is expected that, along the projection horizon, GDP growth will continue to show, as has been the case since mid-2017, a gradual slowdown path,” it said.

“This slowdown ... is due to smaller contributions by external and domestic demand alike to output growth.

“Despite the relative strength of domestic demand, this variable is expected to lose momentum in the coming years,” it said, also pointing to “a projected sharper increase in imports than in that of exports”.

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The projections, which are part of the forecasts submitted by euro zone countries to the European Central Bank last Thursday, also included an initial growth projection of 1.5 per cent for the Spanish economy in 2022, when it also expected unemployment to slip to around 12.5 per cent compared to this year’s projected 14.3 per cent.

Bank of Spain director general Oscar Arce also said that domestic political uncertainty regarding new economic policies persisted, given the lack of a government after an inconclusive election in November – Spain’s second this year.

The bank increased its budget deficit forecasts to 2.5 per cent of gross domestic product this year from 2.4 per cent previously and forecast a 1.4 per cent deficit in 2022.

It also expected the EU-harmonised inflation rate to gradually increase to 1.6 per cent in 2022 from 0.8 per cent in 2019. — Reuters