World economies
Spain
SPAIN is a notable example of how a country should try to recover from an economic slump. Just a few years back, Spain ranked second after Greece as a figure of the eurozone’s huge debt crisis and economic slowdown. The country’s unemployment had climbed to a huge 27pc.
Things have dramatically changed now as Spain shines in the EU’s listless recovery, although without a formal government for months following a split election and a political deadlock.
Spain’s economic growth resumed in 2013 and recovery was strengthened in 2015, with a growth of 3.2pc. The growth was mainly driven by robust domestic demand from strong private consumption supported by improved labour market conditions and increased purchasing power.
Spain has been able to achieve, for the first time in almost 30 years, a current account surplus in a period of positive growth.
Growth is expected to remain somewhat robust but with downward risks to this year’s outlook mainly stemming from the external sector. Specifically, growth could be negatively affected by a more pronounced slowdown than expected in some main emerging economies.
However, unemployment--- stuck at above 20pc since the height of the economic crisis in 2010--- is expected to continue falling. The central bank sees job creation rising at ‘high levels’ in relation to GDP growth. Unemployment is seen slightly above 18pc by the end of 2017.
The Bank of Spain has raised its 2016 growth forecast to 2.8pc. But the Spanish economy minister has lowered its 2016 and 2017 growth forecasts to 2.7pc and 2.4pc, citing global deceleration.
Despite the lower forecasts, Spain had fulfilled its financial obligations and carried out a great deal of reforms. It expects to create 900,000 jobs in 2016 and 2017. The government debt, estimated at over 100pc of GDP in 2015, is projected to peak in 2016 before decreasing in 2017.
The IMF has revised its forecast for GDP growth to 2.6pc for 2016 and 2.3pc for 2017. The change represents the largest upward revision among the world’s biggest economies. Spain’s growth in 2016 is expected to surpass that of the US, Japan and Canada.
According to the Bank of Spain, the economy continued to grow solidly in early 2016, with balanced GDP developments boding well for the rest of the year and 2017.
The central bank estimates that the real GDP grew by 0.7pc quarter on quarter in the first-quarter of 2016, slipping below its gains of 0.8pc in the final two quarters of 2015. Meanwhile, the real output was up 3.3pc (year on year) in the first quarter.
Private sector debt continues to decline but remains high, making the country vulnerable to shocks. While in recent years, debt reduction took place mainly through negative credit flows, it is now mainly driven by nominal GDP growth, as credit has started flowing again.
Accordingly, the negative impact of debt reduction on growth has eased significantly. The general government deficit has continued to narrow in 2015, mainly against the backdrop of strong GDP growth. According to the EC economic forecast, the deficit is projected to amount to 3.6pc of GDP in 2016 against an estimated 4.8pc in 2015.
Public debt is expected to continue to increase from 100.7pc in 2015 to 101.2pc of GDP before starting to decrease in 2017.
Netherlands