Moody's expects Spanish growth to slow to 2 pct in 2017; sees possibility of a third election

US-based ratings agency, Moody’s Investor Service said on Monday that it expects Spanish economic growth will slow to 2 percent in 2017, as compared to 2.9 percent seen this year, on the back of Brexit vote and lower investment levels.

Moody's said that Spain's new minority government would struggle to implement economic reforms, an assessment it called credit negative. It expressed little confidence that Spain will meet the fiscal targets set by the European Commission and said Spain is unlikely to meet this year's deficit target of 4.6 percent of GDP.

Mariano Rajoy was sworn in for a second term as prime minister a week ago, ending 10 months of political deadlock. Prime Minister unveiled his new cabinet team last week and there seemed to be lack of majority and the parliament seemed fragmented.

Unless PM Rajoy gets other parties - notably the opposition Socialists - on board, his government may not survive a full term. Moody's, which gives Spain an investment grade ranking of Baa2 with a stable outlook, said a third election was possible.