highly uncertain, with possible adverse effects on the euro area ( see right - hand panel of chart 5 ), where, moreover, uncertainty regarding the fiscal policy of certain countries persists. all these elements may contribute to a strengthening of the decelerating trend in world trade and activity which is already under way. in spain, this deceleration has already caused some deterioration in the economy ’ s current - account deficit. the compatibility of strong domestic demand with an ongoing external surplus has unquestionably been one of the most positive features of the current upturn, compared with previous ones. however, some of the factors which favoured the strong performance of the external balance have tended to lose steam recently, as is the case of the higher energy bill during much of 2018 due to oil price rises and the weaker tourism flows from the rest of the world. in the future, persistence of the recently observed moderation in activity on a global scale, particularly in the euro area, or a hypothetical increase in the cost of funding spanish external debt will pose risks for the performance of the external balance. at the same time, the need to reduce the still - high external debt makes it essential for the spanish economy to keep running external surpluses in a sustained manner. 1. 4 macroeconomic projections of the draft budget the draft budget is based on macroeconomic projections of real gdp growth in spain of 2. 2 % in 2019, down 0. 4 pp from the 2. 6 % projected by the government for 2018, while the increase in nominal gdp is estimated at around 3. 8 %. this growth projection and its composition are generally consistent with the baseline scenario of macroeconomic projections for spain published by the banco de espana in mid - december and with those of most analysts ( see left - hand panel of chart 7 ). however, i would like to point out the two risks which i consider most significant for the macroeconomic scenario of the budget. banco de espana testimony by the governor of the banco de espana before parliament in relation to the draft state and social security budget for 2019 first, the macroeconomic projections of the budget include an adjustment to the budget deficit clearly exceeding that expected by other analysts ( see right - hand panel of chart 7 ). in particular, the deficit target for general government as a whole stands at 1. 3 % of gdp in 2019, which is a reduction of 1. 4 percentage points ( pp ) with respect to the envisaged final figure of 2. 7 % for 2018.

is a general consensus on the need for reform of the system of regional government financing, tailoring the resources at their disposal to their requirements, based on a previous objective estimate of those requirements, in order to ensure a transparent distribution of funds and increase the degree of fiscal co - responsibility. lastly, let me add that this process of fiscal consolidation needs to be accompanied by an ambitious structural reform agenda to boost potential economic growth. in the banco de espana ’ s latest annual report, published in may 2018, we outlined a broad range of areas where such initiatives could be set in process. here i would like to highlight two of those areas ( see chart 15 ). first, greater labour market efficiency, through lower temporary employment and improved employability, especially in the case of less skilled workers, could boost economic growth potential. second, productivity gains thanks to investment in human capital, greater innovation and the elimination of inappropriate barriers to competition would also have beneficial effects on economic progress in the medium term. before i close i would like to mention, among the structural challenges facing the spanish economy, those facing the banking sector. spanish banks do indeed still face challenges, such as reducing their volume of non - productive assets, improving their capital structure and profitability, strengthening their reputation and making optimum use of technological developments. banco de espana testimony by the governor of the banco de espana before parliament in relation to the draft state and social security budget for 2019 other structural challenges chart 15 total factor productivity potential output growth and contributions 1995 = 100 long - term unemployment rate and temporary employment rate ( a ) % pp spain germany - 1 euro area % of labour force % of dependent employees employment capital long - term unemployment rate ( b ) tfp potential output temporary employment rate ( right - hand scale ) sources : eurostat, ine and banco de espana. a annual data for q2. b unemployed seeking work for more than one year. conclusions i wish to conclude simply by emphasising that although the spanish economy is now entering its sixth consecutive year of real gdp growth, and that this growth pattern is expected to continue, albeit at a progressively slower pace, the risks to the prolongation of the expansionary phase have increased somewhat, especially in the international sphere. thus protectionist measures, brexit and the persistence of certain focal points of political and economic uncertainty within the euro area partially explain the slowdown in the global economy in 2018, but further adverse effects cannot be ruled out in coming quarters. in any event, the