Backing this trajectory is the foreseeable progressive widening of the output gap and the increase in labour costs observed in recent quarters. At this moment, once the Eurosystem has ceased to acquire new assets under its purchase programme, the expansionary stance of the common monetary policy at the start of this year has been mainly determined by two developments: the ECB Governing Council’s announcement that interest rates would remain unchanged at least until the summer of 2019; and the reinvestment over a prolonged period (in any event, for the time needed to prompt the sustainable convergence of inflation on its medium-term reference) of the financial securities acquired under the ECB’s quantitative easing programme. 1.2  The Spanish economy: developments and outlook  In this setting, in 2019 the Spanish economy will remain on the expansionary course on which it embarked six years ago. But there will be a further easing in its growth rate, to 2.2%, compared with the increase of 2.5% estimated for 2018 (see Table 2). The expected slowdown is largely in response to the weaker international setting I mentioned earlier. Nevertheless, the Spanish economy has, in recent quarters, proven significantly resilient, slowing to a lesser degree than our main area of reference, namely the euro area. The contributing factors include, among others, the boost to household income arising from the entry into force, in the second half of 2018, of certain measures included in the Draft Budget for 2018.
The targets for the less discretionary items taken as a whole are in line with the estimates of the models used by the Banco de España. This is particularly so for pension expenditure (the behaviour of which is determined by the increases agreed for 2019 and population ageing), unemployment benefits (which depend mainly on the behaviour of unemployment) and interest in National Accounts terms (which reflects the behaviour of government debt and of interest rates). 2.2  Projected revenue in the Draft Budget  On the revenue side, a broad set of legislative changes is proposed, including notably an increase in personal income tax and in wealth tax at higher income levels, the establishment of a minimum rate of 15% of taxable income for large corporations, the limitation of double taxation exemptions, and an increase in hydrocarbons tax, focused on diesel. On official estimates, these changes would raise government revenue by some € billion in 2019. Also, the Draft Budget includes the new taxes on financial transactions and certain digital services, with an officially estimated impact on revenue of some € billion in 2019. The Draft Budget revenue projections are also affected by the introduction in July 2017 of the system known as “immediate supply of VAT information” (SII by its Spanish initials).