Spain’s Economy Keeps Growing

Spain’s Economy Keeps Growing

Spain’s Economy Keeps Growing

Spain clawed its way out of its second recession in five years late last year and since then the economy is on a steady path back to growth. So much so that it looks likely to have outgrown Eurozone peers like France or Italy. According to recent Bank of Spain data, GDP grew 0.5 per cent in the second quarter from the first when it rose 0.4 per cent.

The faster-than-expected uptick in domestic demand and a more favourable trend in unemployment have led the Madrid-based central bank to raise its 2014 GDP forecast to 1.3 per cent from a previous 1.2 per cent. For 2015, it has upped its estimate to 2.0 per cent from 1.7 per cent, outpacing the Spanish government’s revised forecast for 1.8 per cent growth.

So it’s so far so good for Spain, as its recovery also fuels the return of international investors. And most economists are confident the economy will continue to outperform in 2015.

CONSUMPTION REVIVAL TO FUEL GROWTH

One of the pillars of the Bank of the Spain’s growth projections is a stronger-than-expected revival in domestic demand and consumption. Households have benefitted from the government’s 2012 labour reform, which included measures to create new permanent jobs in Spain’s so-called temporary contract economy. And more reforms are on the cards.

For the last six years, the Eurozone’s fourth largest economy has been blighted by its high jobless rate as the country struggled to deal with the fallout from a prolonged housing boom which saddled banks and consumers with massive debt. But the latest unemployment data showed that the rate edged below 25.0 per cent in April-June for the first time since the third quarter of 2012.

Apart from more job opportunities, the recent fiscal reform will also increase Spaniards’ disposable income by easing the tax burden. Another of Spain’s key growth drivers is its exports sector, with the capital goods, food and automotive industries leading the way.

The Bank of Spain estimates export growth of 4.6 per cent in 2014, jumping to 5.9 per cent in 2015. Its outlook for investment is equally bullish, forecasting growth of 4.2 per cent in 2015, compared with 1.8 per cent in 2014.

SPAIN BACK ON THE INTERNATIONAL RADAR

As its economy turns the corner, Spain is back on overseas investors’ radar. Here are few reasons why:
• They applaud Spanish industries’ increased competitiveness
• They welcome the fact that its banks have cleaned up and strengthened their balance sheets
• They can benefit from reforms – like cutting corporate tax rates – aimed at enhancing Spain’s business environment

And this makes for a virtuous circle! As foreign capital inflows to Spain increase, the economy will continue to expand and regain its former glory!

For information on investing in Spain, contact corporate law firm Argali Abogados.

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