Spain reforms make it top investor bet for 2015

Spain reforms make it top investor bet for 2015

Spain reforms make it top investor bet for 2015

After struggling to emerge from a deep economic downturn which lasted the best part of five years, Spain is firmly on investors’ 2015 buy list! Once a protagonist of the Eurozone sovereign debt crisis, the country’s economy has now returned to growth and is outpacing former eurozone front-runners like France. In September, Spain raised its estimates for economic growth in 2014 and 2015, while France lowered its outlook after GDP growth figures which disappointed expectations in the first half of the year.

So what is behind the successful turnaround in the Eurozone’s fourth biggest economy? The main driver has been a series of reforms aimed at boosting Spain’s competitiveness and creating an attractive fiscal environment for businesses. While France’s government has implemented a policy of tax hikes over the last couple of years – with companies and the wealthy hardest hit- Spain is cutting taxes, both at the personal and corporate level. Other incentives like granting residency permits to people who invest in local businesses make Spain a much more attractive bet.

 

LABOUR REFORM FUELS RECOVERY

Spain finally exited a two-year recession in the second half of 2013, led by strong growth in exports. This was a direct result of changes to the labour market. After a landslide election victory in November 2011, the conservative Popular Party implemented a long overdue labour reform the following year. One important element of the reform was to encourage companies to adopt a wage moderation policy. This has helped to lower labour costs and boost overseas competitiveness and it also encouraged fresh foreign cash inflows.

Spain’s auto industry was one beneficiary of renewed interest from investors lured by a significantly cheaper labour market compared to Europe’s other big car-making countries. The 2012 labour reform also included incentives for companies to offer more permanent contracts, a measure which has helped trim the country’s jobless rate. This, however, is an area which requires further overhaul to achieve sustainable job creation and the government has promised a second labour reform. In this general election year, such a move will take on even more importance.

 

TAX CUTS TO WIN OVER BUSINESSES

The Fiscal Reform announced last year has also been a savvy move on the part of the government. The planned reduction from 30 percent to 25 percent in the corporate tax rate over the next two years will ensure that foreign firms will choose Spain as a base from which to expand their operations abroad. With bank credit beginning to flow, albeit slowly, Spain will be the place to do business!

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

Leave a Reply