Spain Economy to Outperform Eurozone Peers

Spain Economy to Outperform Eurozone Peers

Spain Economy to Outperform Eurozone Peers

Spain’s economy is set to outpace that of its Eurozone rivals in the next two years, according to the International Monetary Fund (IMF).

As the country’s recovery continues and the outlook for the jobs market improves, albeit slowly, Spanish GDP will grow 2.5 percent this year, up from a January estimate of 2.0 percent, the IMF said in its April World Economic Outlook.

For 2016, growth is forecast at 2.0 percent compared with a previous estimate for 1.8 percent.

The Washington-based agency is banking on an upsurge in domestic consumption to be Spain’s main economic driver, as external demand still lags amid expected slower growth in the US and emerging markets like Brazil.

The IMF’s new forecast falls short of the Spanish government’s upbeat prediction for 3 percent growth in 2015, but is still ahead of the European Commission’s forecast for 2.3 percent.

Apart from leading the Eurozone’s economic performance, the IMF said Spain is also on course to grab second place, after the UK, in the European Union GDP growth rankings.

 

EASIER FINANCING TO BOOST DEMAND

So what factors will ensure that domestic demand in Spain will live up to the IMF’s expectations? These include:

* Improvements in the labour market

* Easier financing for companies and households 

* A rise in consumer confidence

In its April report, the IMF forecasts the jobless rate in Spain will drop to 22.6 percent from 24.5 percent this year.

Spanish unemployment levels peaked at 26.9 percent of the workforce in the first quarter of 2013 before falling to 23.7 percent at the end of 2014.

After restructuring and recapitalising, Spain’s banks are lending again. The European Central Bank’s monthly liquidity shots are also helping to loosen financing conditions.

And this is encouraging both domestic and overseas businesses to embark on fresh investment projects which, in turn, will create new jobs.

Incipient job creation has been positively affecting consumer confidence in Spain, as has the lower consumer price index, which has brought down the cost of basic goods.

Analysts expect consumption to grow in 2015, in part thanks to an cut in income tax which will be applied to 2014 revenues.

External factors like lower oil prices are also a bonus for consumers.

 

UK GROWTH POSITIVE FOR SPAIN

While Spain is chasing the UK for the top spot in the EU growth rankings, it is also set to benefit from that country’s buoyant economy.

Sterling’s current strength against the euro is luring British tourists back to Spain, a long time favourite holiday destination. Tourism accounts for about 10 percent of GDP.

And changes to UK pension regulations, enabling lump sums to be used for any purposes, is also expected to fuel a surge of property buying, given the better value available in Spain’s real estate market versus the UK.

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

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