IBERSOL Annual Report and Consolidated Accounts 2017

ANNUAL REPORT 2017 The average rate of inflation increased significantly in 2017 (from0.6% to 1.6%), in a context of a slight increase in unit labour costs. Over the next few years, unit labour costs are estimated to increase in line with the EUROSYSTEM forecasts for the Eurozone. Gross Fixed Capital Formation registered strong growth in its main com- ponents (construction, machinery and equipment and transport mate- rial), a trend which is expected to continue, albeit to a lesser extent, in the following years. The economic recovery strengthened in 2017 due to the structural re- forms undertaken in the recent past and an increase in foreign demand. Private investment has been expanding rapidly, fostering employment creation. The current challenge is sustainability of growth and its increa- se to levels that permit, in the medium-term, a consistent convergence with the standards of living of the most advanced countries of the Euro- pean Union. Situation in Spain In 2017, and for the third consecutive year, the Spanish economy grew more than 3%, well above the average of the Eurozone. The economic upturn has been occurring in a balanced manner between internal and external demand, guaranteeing the sustainability of econo- mic growth. The strong growth of employment sustains household income and con- sumption, while at the same time corporate investment continues to grow, underpinned by a climate of confidence and better profit margins. Residential investment increased, reflecting employment gains and fa- vourable financing conditions for families and companies. In addition, the 27