Spain cuts 2018 growth forecast and blames Catalonia

The Spanish government has cut its 2018 growth forecast and is blaming the Catalan political crisis for it. In a report send to the European Commission, the Spanish government said economy would grow 2.3% next year, 0.3% less than initially forecasted.

In the letter, the Economy ministry also said that Spain will not meet its deficit target, set at 2.2% by Brussels, and is instead projecting it at 2.3%. The Spanish government says the "uncertainty" around the Catalan situation and the impossibility of passing the budget –since the Basque nationalist party withdrew its support following Madrid's crackdown of the Catalan referendum- will hurt the economy and employment.

Catalonia accounts for one-fifth of the Spanish economy. On Monday evening, two pro-independence leaders were jailed without bail on alleged sedition crimes, prompting a huge outcry in Catalonia even amongst politicians not supporting independence such as those from left-wing Podemos or IU.

In the report, the Spanish Economy Ministry said that there is a reduction in "domestic demand" due to the "negative impact of the current political situation in Catalonia".