Spain has become the euro zone's star performer. The European Union has revised up its growth forecast to 2.3 per cent this year - a percentage point above the euro zone average. Spain might do even better. Even so, the recovery has yet to impress Spaniards.
The Spanish economy has been consistently surprising on the upside. Fourth-quarter GDP growth came in at 0.7 per cent, above market expectations of 0.5 per cent. It's the third consecutive quarter it has pulled ahead of the euro zone, according to Citi estimates. Assuming it maintains momentum, growth may be even closer to three per cent this year. The main driver seems to be internal demand, in spite of inflation turning negative, to an expected -one per cent this year. Low prices, cheap oil and tax cuts should boost disposable income this year, boding well for consumers. Record-low borrowing rates will help mortgage owners. Spain is finally creating jobs, faster than expected.
Investment has picked up too. Foreigners have invested billions of euros in real estate, a market that finally turned a very long corner. Funcas, a think tank, expects the construction sector to grow for the first time in seven years. And, the weak euro provides a tailwind for exports.
Spaniards are becoming more optimistic, albeit slowly. Twenty eight per cent of them say they expect the economy to improve in a year's time, according to a January state survey, against 16 per cent of pessimists. Yet, more than three-quarters still say the economy is doing badly or very badly. One reason may be that while flows are going in the right direction, stocks remain scarily high. Nearly 24 per cent of the population is officially jobless.
The unemployment rate will still top 20 per cent in 2016, on EU estimates. The share of workers on temporary contracts has inched down to 24.2 per cent, while part-time work is increasing and accounts for 16 per cent of the jobs. That is below the EU average, but a high proportion of part-time employees would prefer to work more hours.
A string of corruption scandals has also sapped morale and is providing a breeding ground for new political movements like Podemos. The political landscape looks uncertain. Spain has come a long way, but it needs to do more to convince its citizens the strong recovery is here to stay.
The Spanish economy has been consistently surprising on the upside. Fourth-quarter GDP growth came in at 0.7 per cent, above market expectations of 0.5 per cent. It's the third consecutive quarter it has pulled ahead of the euro zone, according to Citi estimates. Assuming it maintains momentum, growth may be even closer to three per cent this year. The main driver seems to be internal demand, in spite of inflation turning negative, to an expected -one per cent this year. Low prices, cheap oil and tax cuts should boost disposable income this year, boding well for consumers. Record-low borrowing rates will help mortgage owners. Spain is finally creating jobs, faster than expected.
Investment has picked up too. Foreigners have invested billions of euros in real estate, a market that finally turned a very long corner. Funcas, a think tank, expects the construction sector to grow for the first time in seven years. And, the weak euro provides a tailwind for exports.
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The unemployment rate will still top 20 per cent in 2016, on EU estimates. The share of workers on temporary contracts has inched down to 24.2 per cent, while part-time work is increasing and accounts for 16 per cent of the jobs. That is below the EU average, but a high proportion of part-time employees would prefer to work more hours.
A string of corruption scandals has also sapped morale and is providing a breeding ground for new political movements like Podemos. The political landscape looks uncertain. Spain has come a long way, but it needs to do more to convince its citizens the strong recovery is here to stay.