Spain GDP grows at fastest pace
in almost six years
The Spanish economy grew at its fastest pace in
almost six years in the final quarter of last year, raising hopes that the recession-scarred country
is finally on the road of recovery.
Luis de Guindos, the economy minister, told
parliament on Monday that gross domestic product rose 0.3 per cent in the three
months to December, a marked increase from the 0.1 per rise in output in the
third quarter. “For the first time since the start of the crisis, we are in a
different scenario,” Mr de Guindos said.
The latest data, which have yet to be confirmed by
the central bank and statistics office, suggest Spain’s tentative recovery
after the bursting of its property bubble and banking crisis is finally
gathering steam. It is the latest in a series of economic signals that have
bolstered confidence in the Spanish economy and sparked a surge in foreign
investor interest.
Most importantly, in a nation where one in four
workers is out of a job, there is mounting evidence that the still-towering
unemployment rate is slowly starting to fall. Last month, the number of
registered jobless in Spain fell 108,000, one of the sharpest
December falls on record, and the third monthly decline in a row in registered
jobless numbers.
Some of that improvement is because of migrant
workers returning to their home countries, and to long-term unemployed dropping
out of the system because they are no longer entitled to benefits. But most
analysts agree that a mild recuperation in the job market is indeed starting to
gain traction, helped by the government’s 2012 labour
market reforms and the persistent drop in Spanish wages.
“Employment creation in the last few months was
considerable. That was a surprise to most of us,” says Marcel Jansen, a labour
market expert and professor of economics at Madrid’s Autónoma University.
“Since late fall the figures are clearly showing there are signs of recovery.
It is hard to say how solid this recovery is but the numbers have certainly
exceeded expectations.”
There was more good news from Spain’s
long-suffering services sector, which in December grew at its fastest pace in
more than six years. Surveys of business and consumer confidence
also showed striking leaps at the end of last year, suggesting that companies
and households alike are starting to sense that a turnround is at hand.
Taken in conjunction, the data lend strength to the
argument that Spain is experiencing the early stages of a classic recovery
cycle, with falling wages leading to a rise in competitiveness, followed by a
surge in exports that allows companies to invest in new plant and machinery,
new hiring and – eventually – a rise in domestic demand and government tax
revenue. Spanish exports have been on a tear for the past two years, and
business investment started rising in early 2013.
The question now occupying economists and Spanish
officials alike is this: how far, and how fast, can these improvements spread
to the broader domestic economy?
“What we are seeing is that the improvement in the
financial economy is feeding through into confidence, and that is possibly
encouraging people to spend a bit more,” says Edward Hugh, a Spain-based
economic analyst and commentator. “But for this to continue people need this
improvement to feed through into their income, and that is not yet happening.”
It is a view that is broadly shared among Spanish
economy watchers. Most forecasters believe, for example, that domestic demand
will remain broadly flat this year, leaving exports once again to pull the
economy ahead.
Indeed, some economists warn that there is a risk
that the recent surge in investor
enthusiasm for Spain is running ahead of itself. On Thursday, for
example, the Spanish treasury managed to sell €3.5bn in five-year government
bonds at a yield of just 2.41 per cent, the lowest in the country’s history.
The Madrid stock market is at its highest level since July 2011, and companies
that were seen as untouchable only a year ago are enjoying a surge in
popularity.
Bankia,
the nationalised savings bank that emerged as the symbol of the Spanish
financial crisis, revealed last week that it had raised €1bn by issuing senior
unsecured bonds, citing “strong demand”.
Luis Garicano, a professor at the London School of
Economics, argues the recent surge in investor appetite for assets from Spain
and other countries on the eurozone periphery is “probably an excessive
reaction”. He adds: “I think what you see is a picture of stabilisation, but
there is still large volatility and potential for accidents . . . Financial markets are being too sanguine about the underlying structural
problems in Spain, where the reality on the ground is still tough.”
Most analysts argue that – for all the recent signs
of improvement – the Spanish economy remains on course for a prolonged period
of slow growth, with unemployment falling only slowly.
Compared to the financial drama of 2012, when
Madrid was forced to plead for an EU banking bailout, the current phase of
gradual recuperation marks a profoundly welcome change. But the remnants of the
crisis – high debts, a moribund housing market and a dearth of bank credit –
look certain to slow down the recovery ahead. As Prof Jansen says: “Six months
of good news doesn’t wipe out five years of economic disaster.”