The other investment component, that linked to construction, has undergone a most significant adjustment in the past decade. This means that, in 2018, following several years 4/7  of recovery, this GDP component was still at around 16% of its pre-crisis level. The downscaling of investment in housing entailed a decline in its weight in GDP to levels close to 5% in 2018, in line with Spain’s peers, compared with 12% pre-crisis. The reduction in housing investment activity came about in parallel with a decline in house prices which, despite the growth observed in recent years, remain in real terms some 32% below the nationwide levels observed in 2007, albeit with some cross-regional dispersion. All these developments better position this sector to support economic growth, as indeed has been the case in 2018. The weight of non-residential construction, for its part, has also diminished considerably, largely reflecting the impact of the reduction in public-sector investment spending. Beyond these improvements, as I stated in my introduction the Spanish economy remains prone to certain vulnerabilities and faces significant challenges, which I shall now set out. First, despite the notable above-mentioned reduction in private debt in recent years, on the latest available data for 2018 Q3 the negative net International Investment Position (IIP) of the Spanish economy stood at 81% of GDP, and that of gross external debt at 168% of GDP, levels that are high in relation to other advanced economies and which mark a factor of vulnerability for the economy as a whole.
In a macroeconomic context of weak demand, these rates, so far from 2%, not only endanger the current anchoring of medium-term inflation expectations, but also heighten the risks to price stability and hamper the economic recovery of the area as a whole. Economic recovery is even more difficult for countries that are in the process of correcting imbalances that built up in the past, and in particular for those, such as Spain, that have suffered competitiveness losses and need their prices and costs to fall relative to the euro area as a whole. To address these risks the ECB has in recent months taken further measures to make its highly expansionary monetary policy even more expansionary. BIS central bankers’ speeches  1  As regards standard measures, the ECB has reduced the interest rate on its main refinancing operations to 0.05%, which is technically the lower bound for this rate. Also, the interest rate on the deposit facility, which is the rate at which the cash surpluses that credit institutions hold in their Eurosystem accounts are remunerated, stands at negative levels (–0.20%), which discourages the accumulation of such balances and stimulates lending. Recent actions also include non-standard measures: a new long-term financing facility specifically aimed at promoting greater lending to the private sector; and two asset purchase programmes, one for asset-backed securities and the other for different types of covered bonds. Finally, on 22 January, the ECB announced new monetary stimulus measures.