November 2, 2017 / 11:53 AM / a year ago

Bank of Spain warns of possible growth slowdown due to Catalonia

A woman displays an Estelada (Catalan separatist flag) from a balcony at the Catalan region's economy ministry building during a raid by Spanish police on government offices, in Barcelona, Spain, September 20, 2017. REUTERS/Susana Vera

MADRID (Reuters) - The uncertainty over the independence drive in Catalonia could lead to slower economic growth and lower job creation in the next few months in Spain, the Bank of Spain said on Thursday.

If the secessionist movement intensified or dragged on it could have an effect on economic outlook and financial stability in Spain, it said.

In its November report, the Bank of Spain said that in the worst case scenario, the political uncertainty caused by an illegal secessionist drive could reduce Spanish economic growth by 2.5 percentage points between end-2017 and 2019.

However, a quick resolution of the Catalan independence drive could mitigate the risks for the Spanish economy, it added.

The government currently forecasts the euro zone’s fourth-largest economy to grow 3.1 percent this year, but the standoff with Catalonia over its independence ambitions has prompted Madrid to slash growth projections for next year.

Spain’s Economy Minister recently said the Spanish economy could grow by more than 2.5 percent next year just weeks after he cut 2018’s growth forecast to 2.3 due to a political crisis in the northeastern region of Catalonia.

Reporting By Tomas Cobos and Blanca Rodriguez; writing by Jesús Aguado; editing by Paul E. Day

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