Spain goes back for the future

Spain is set to return to the speed of growth it had reached prior to the economic crisis with a BBVA study estimating its economy will grow by 1.1 per cent during the second quarter of 2017. This will be a rate of 20 per cent more growth when compared to the first quarter.

According to the IMF, it now has the strongest growth of the entire Eurozone, apart from the UK, something the IMF itself predicted back at the beginning of 2015.

If Spain can continue to build on this, BBVA research also predicted a GDP growth of 3.5 per cent for the year as the country gains traction between March and June. If this happens it will be the highest growth rate since that seen in 2006 before the bursting of the housing bubble which led to the crisis.

This speeding up of the economy is based on domestic demand which continues to recover thanks to the strength of the labor market with forecasts indicating that unemployment will fall to 17.3 per cent during 2017, reducing again to 15.6 per cent in 2018.

There are also signs that Spain is becoming one of the main economic engines in Europe with more and more interest being shown in its exports. The report says, ‘[Here], available indicators suggest that goods and non-tourism services would have grown during the first quarter at a similar rate to that observed at the end of 2016.’

IMF THOUGHTS

Speaking to the Leading European Newspaper Alliance in Brussels recently, IMF managing director Christine Lagarde spoke admiringly of Spain’s recovery citing the ‘capacity for resistance of a country that has carried out serious and solid reforms.’

She said that the figures had not improved by miracle, rather than through reforms, adding, ‘The economy is turning the corner away from the crisis; unemployment, while still very high, has fallen. And we expect it to continue falling.’

One of the keys to Spain’s recovery, she said, had been the determination to carry out reform, for example solving the instability of the banking sector and toxic loans.

Giving advice on how to maintain the moves forward, she said, ‘We believe that the duality of the labor market, where temporary workers are exposed and where others with permanent contracts have greater protection, is not helping to resolve unemployment in Spain. This duality has to be tackled.’

More positively, she added, ‘We cannot say we have accomplished our mission, but Spain has made great strides. Everything is easier with growth. Now Spain has growth and stronger momentum than any other EU member, except perhaps for the United Kingdom. We hope this translates into more employment and higher incomes with a reform of the labor market.’

A NEW FINANCIAL CENTRE FOR EUROPE?

It is possible that Spain could gain a massive boost in this increasingly positive situation thanks to Brexit with many financial sector companies possibly looking for other options should London no longer continue to be the most viable financial centre for Europe. JP Morgan said that Spain is in the picture for this with Madrid a candidate to become the hub thanks to the availability and value of its real estate. Kian Abouhossein, head of JP Morgan’s European banks equity research team said, ‘In terms of markets with high availability and high oncoming supply, Madrid places first, followed by Frankfurt.’

He also predicted that over the next five to ten years, one location in Europe will emerge as the financial hub of the union.

For more information, please contact corporate law firm Argali Abogados.

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