The real outlook for Spain

I’ve just been reviewing the BBC website and I found a great article. It starts with the statement “The unemployment rate in Spain hit a 12-year high in 2008 of 3 million, figures show, a further sign of the economic slowdown.”
So unemployment figures show that there are the same amount of unemployed now in Spain as there was in 1996. But what does this mean?

Well let’s have a look at some statistics.
According to INE (National Statistics for Spain) the total population of Spain in 1996 was slightly under 40 million, remember unemployment was 3 million, from the start of 2009 the population of Spain has reached 46 million! It should also be noted that a majority of the 6 million increase consists of people of working age. Of course these figures are from people officially in work. As I’m sure many of you know, if you have lived or worked in Spain, many people might be unemployed (officially) but are working (unofficially).

Unfortunately Spain seems to always have had the issue that its unemployment rates have been higher than the EU average. But it has also been one of the main engines of growth in Europe for the last decade. It seems that extremes always appear to apply here. When the neighbouring economies are doing badly, things are that little bit worse here, but when they are doing well, it goes very well here in Spain.

I’ve also been looking into the IMF (International Monetary Fund) preliminary findings on Spain and several important bits came up

Quoting from the IMF findings:

“… The authorities (spain) response has been forceful and earlier than EU partners with market-based banking policies and substantial fiscal measures.”

“Banks have held up well so far owing to sound prudential regulations and supervision and the strong traditional retail banking model”

“In conjunction with EU partners, Spanish authorities have reacted promptly to mitigate the effects of the financial turmoil while preserving a market-orientated system”

Nothing quite like positive statements form the IMF to instil confidence in a country. Of course this does not mean spain is doing everything perfectly. Three points that Spain definitely requires to take on-board are
“More significant reforms than currently contemplated are needed to achieve a vigorous medium-term recovery and avoid a potential L-shaped outlook”

“Product and service market reforms require a strong and full implementation to deflate margins and bolster productivity”


“labor market reform is the most important missing policy issue.”

From a personal point of view I feel that Spain still has great potential for growth and there is no reason why we can’t see this happen. As always the danger is that the politicians have to be willing to implement it. As luck would have it (in a way) its up to the socialists to implement these changes. If they do propose them, the PP (right-wing) will support them. Which to date has happened. Of course both parties are still trying to score points of each other but as long as they implement these changes there is hope.

Andrew Bellés

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