Spain Grows Faster Than European Rivals

Spain Grows Faster Than European Rivals

Spain Grows Faster Than European Rivals

Spain is expected to be the highest growth market in the eurozone in 2015, according to the International Monetary Fund (IMF)’s World Economic Outlook report published last month. This is no mean feat for a country which was once a protagonist in the region’s sovereign debt crisis and exited a two-year recession just 18 months ago.

Spanish GDP is forecast to expand 2.0 percent in 2015, according to the IMF.  This compares with the estimate released by the organisation last October for 1.7 percent growth.

For 2016, the economy is seen expanding at a slower pace of 1.8 percent but it will still outperform the traditional powerhouse of Germany which, along with France and Italy, received growth downgrades for this year and next. In fact, the US and Spain were the only bright spots in the IMF’s latest outlook for the global economy, which it expects to grow 3.5 percent for 2015 and 3.7 percent for 2016.

SPAIN GROWTH FUELLED BY EXPORTS, INVESTMENT

So what’s got the IMF all excited about Spain? Here are a few pointers:
• Strong external demand – Spanish exports are benefiting from companies’ improved competitiveness due to lower labour costs.

• An increase in foreign investment, seen as key to a sustainable recovery.

• A gradual uptick in domestic demand as financial conditions improve, with expectations for a revival in lending to both companies and households. Lower personal tax rates will also help.

• A booming tourism industry

Spain finally emerged from a five-year downturn in the third quarter of 2013 thanks to a series of reforms, the most important of which was the overhaul of the labour market in 2012, which included measures to encourage wage moderation.

Since then, changes to the country’s tax system – including lowering corporate taxes to attract more overseas investment as well as expansion by local firms – have contributed to stimulating the economy.

The IMF’s 2015 GDP growth forecast for Spain coincide with both the government and the Bank of Spain’s estimates.

 

EUROZONE PEERS NOT SO BUOYANT

Spain’s eurozone peers’ performance has been less impressive over the last year and the outlook is also less rosy, despite the fall in oil prices and the weaker euro. In the third quarter of 2014, output slowed in Germany, Europe’s largest economy, and declined in France.

An increase in business investment in Spain over the last year compares with a continued decrease in France, where the government has implemented a policy of tax hikes, with companies hardest hit.  The eur0zone’s second largest economy needs to implement structural reforms, following Spain’s lead.

Creating more full-time jobs will remain Spain’s biggest challenge. The government expects the unemployment rate to drop to 22.2 percent of the workforce by end-2015 from 23.7 percent in the fourth quarter of 2014.

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

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