Optimistic Growth Forecast for Spanish Economy

Spain has released consistently strong economic data over the last eight quarters, leading economists to raise forecasts towards more positive growth through 2015.....

Spain has released consistently strong economic data over the last eight quarters, leading economists to raise forecasts towards more positive growth through 2015.

This is in sharp contrast with other countries in the Eurozone that are currently struggling quite significantly. For example, France and Italy have lowered their economic outlook for the coming year and Spain was supposedly in just as sticky a mess in the years after the financial crisis.

Much to the surprise of Eurozone counterparts, Spain has managed to emerge – albeit moderately – from the deep recession it has experienced, marked by excruciating unemployment levels, a banking crisis and a slump in the property market.

German economic data has rocked financial markets

Now, real estate professionals and economists are suggesting that Spain could be offering one of the best economic performances in the Eurozone in 2014, flourishing partly due to increased exports. Conversely, France has seen growth stagnate and Germany, formerly the Eurozone's economic powerhouse, has seen its economy contract by 0.2% in Q2 – a significant shock to financial markets.

It's widely known that Spain experienced a serious financial drop in the 2008 downturn, followed by deep recession. At the heart of Spain's economic crisis was the collapse of the building boom during 2008 that left millions unemployed and plunged the nation into a double recession. The economy declined steeply in response to downward pressure from soaring joblessness and crashing property prices.

Despite the financial crisis marking Spain's worst recession in decades, the country is now emerging as the Eurozone's economic leader in 2014.

Is Spain set to overtake Germany as the Eurozone's strongest economy?

Recently, the financial ministry for Spain published reviewed forecasts of 1.3% growth for 2014, with 2% growth predicted for 2015. Although the upticks aren't much more than earlier estimates of 1.2% and 1.8% respectively, it does reflect a positive change.

Unemployment remains an issue although the last few quarters have seen marginal decreases leading to expectations that rates will ease to 24.2% this year, 22.2% in the following year.

The construction sector has been the beneficiary of much government and foreign investment, with moderate growth releasing more jobs into the market. The government announced that almost 622,000 jobs would be released by the end of 2015 leading to employment growth of 0.7% this year, expected to grow by a further 1.4% in 2015.

Spanish government exercises caution

Despite the positive news, the Spanish government are exercising caution against becoming flippant, conscious of the country's place in a Eurozone that currently seems to be spiralling into serious deflation, poor growth and joblessness.

2014 has seen the first signs of price growth in Spain's property market, particularly in regions attracting foreign investment. Prime property in locations such as Marbella have seen an increase in transactions, principally from Middle Eastern, Russian and Asian investors looking for safe haven property purchases outside their own countries.

However in some parts of Spain, property prices fell by more than 60%, meaning that price increases are coming from a very low base, with plenty of bargains still to be had in this quietly booming country.

- Wednesday 15 October 2014

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