in redressing public finances and in reducing private - sector debt, and casting doubt on the resilience of the financial system. that has triggered tensions on the debt markets and activated perverse feedback loops. lastly, the spanish economy risks seeing its capacity to obtain external funding severely blocked. while in the short run this does not actually constrain ordinary funding flows ( given the banking system ’ s possibility of resorting to ecb funding ), the prolongation of such a situation will be extremely harmful in the medium term. spain is in this situation despite the fact that its authorities have implemented far - reaching reforms in recent years to resolve the inefficiencies in its economic functioning, to correct the serious deterioration in public finances and to redress and restructure the financial system, in order to restore financing flows. resolving these problems is taking longer than expected, but that should not lead to reform fatigue. it is important to persevere with the economic policy actions undertaken. in this way the levels of competitiveness needed to ensure the smooth functioning of the euro area may be regained, the ordinary funding channels restored and the imbalances built up in recent years, in particular in relation to public finances, finally corrected. these requirements must be met if the economy is to begin to generate employment and to grow. the adjustment continues to fall on domestic demand, weighed down by the correction of imbalances, the fiscal consolidation drive and tighter financing conditions. the external sector continues to soften the impact of domestic spending on activity, due both to the buoyancy of exports and to the slackness of imports from the rest of the world, but its contribution is insufficient to halt the decline in output. in this setting, job destruction continued apace in 2011 and in 2012 to date. and, owing to the uncertain prospects for the spanish economy, a turnaround is not expected in the very short term. however, as this episode is progressively overcome, the approved labour market reforms will foreseeably have a favourable impact on employment generation, contribute to adjusting working conditions to firms ’ specific circumstances and provide for a more efficient reallocation of productive resources, which should ultimately prompt an increase in productivity levels. the cyclical weakness and the adverse behaviour of the labour market have not fed through sufficiently to the cost and price - formation mechanism, which still shows considerable inertia. the adjustment of unit labour costs is being achieved primarily thanks to the high productivity bis central bankers ’ speeches gains brought

percentage points ( ppts ) above the high end of the inflation target range of 2. 0 percent to 4. 0 percent for the year. nonetheless, as projected, inflation has gone down significantly, falling toward the midpoint ( at 3. 0 percent in april 2019 ) of the target band in the latest inflation print. this is not surprising given that the price pressures in 2018 were driven by cost - push factors. with the abatement of supplyside pressures, inflation has also started falling within target. the contribution of food inflation ( represented by the yellow bar ) to overall inflation has dropped markedly especially with rice prices easing in recent months brought about by the continued arrival of imports and the onset of the summer harvest season. looking ahead, we expect inflation to remain on a target - consistent path for 2019 and 2020. the latest baseline forecasts ( as of 9 may 2019 mb policy meeting ) indicate that inflation is projected to average at 2. 9 percent for 2019 while inflation forecast for 2020 is slightly higher at 3. 1 percent 1 / 4 bis central bankers'speeches due largely to the rebound in crude oil prices. meanwhile, risks to the inflation outlook remain broadly balanced for 2019 amid risks of a prolonged el nino episode and higher - than - expected increases in global oil prices. for 2020, the risks continue to lean toward the downside as weaker global economic activity could temper commodity price pressures. similarly, forecasts of other institutions generally convey the same expectations. results of the bsp ’ s april 2019 survey of private sector economists showed lower mean inflation forecast for 2019 at 3. 1 percent from 3. 3 percent in the previous survey round. the mean inflation forecasts for 2020 and 2021 both declined to 3. 3 percent from 3. 4 percent. meanwhile, projections from other institutions also show inflation within target for this year and the next. analysts expect inflation to continue easing and settle within the government ’ s target range. however, possible upward pressures are seen to keep inflation from further decelerating. ( upside risks to inflation ) : potential rebound in global crude oil prices, adverse weather conditions such as el nino, higher electricity rates, reduction in the bsp ’ s policy interest rate, and higher domestic demand due to the upcoming midterm elections and school enrollment ( downside risks to inflation ) : the lower inflation prints, implementation of non - monetary policy actions to increase domestic food supply and stabilize prices such as the rice tariffication law and the mitigating measures put in place by the