October 29, 2019 / 11:40 AM / a month ago

Catalonia unrest and politics could slow Spanish economy: de Cos

MADRID (Reuters) - Unrest in Spain’s wealthiest region of Catalonia and any further political uncertainty could affect private sector investment decisions, posing another potential risk to the economy, the head of the central bank said on Tuesday.

FILE PHOTO: A riot police officer runs towards separatist demonstrators during clashes after a verdict in a trial over a banned independence referendum in Barcelona, Spain, October 15, 2019. REUTERS/Albert Gea/File Photo

“Regarding the Spanish economy, the latest data point to a gradual weakening of activity,” Bank of Spain Governor Pablo Hernandez de Cos told a conference, adding that Spain’s long-running political stalemate could weigh on economic prospects unless a Nov. 10 election produces a strong government.

“We cannot rule out the possibility that the uncertainty about the future course of some internal economic policies ... or recent events in Catalonia, may also have a negative impact, if they persist over time, on the spending decisions of private agents,” de Cos said.

Catalonia has been convulsed by almost two weeks of mass, sometimes violent, pro-independence rallies since nine politicians and activists were jailed on Oct. 14 for up to 13 years for their role in a failed secession bid in 2017.

Many shops in downtown Barcelona have been shut during the rallies and there are growing concerns in Spain’s tourism capital about the impact of the unrest on business.

The Catalonia crisis has also further complicated the country’s fragmented political environment, just as Spain is preparing for its fourth election in as many years after having been without a proper government or budget for months.

“It is urgent that the government emerging from the election has the initiative and enough support to carry out reforms to tackle the vulnerabilities that still exist in the Spanish economy and to increase its capacity for growth,” de Cos said, calling for “a broad consensus” among the political parties.

Most opinion polls point to a stalemate after the Nov.10 election, with no clear majority in sight.

The economy has largely been immune to Spain’s political woes, steadily exceeding the euro zone’s average growth rate over the past few years, but its expansion has slowed of late.

Spain’s caretaker government earlier this month forecast gross domestic product (GDP) would increase 2.1% this year, down from its previous forecast of 2.2%, and slow to 1.8% in 2020.

The Spanish economy also faced additional risk factors such as Brexit and global trade tensions, de Cos said.

Reporting by Jesus Aguado and Emma Pinedo; Writing by Andrei Khalip; Editing by Ingrid Melander and David Clarke

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