The Process Of Private Debt Adjustment In Spain May Be Nearing An End

Private debt in Spain is adjustingPrivate debt in Spain is adjusting

José Luis M. Campuzano (Spanish Banking Association) | It’s been a very positive  thing how the banks in Spain have been capable of combining more solid balance sheets with strong growth in new credit, while also continuing to absorb the consequences of the crisis.

According to Q2 data from the Bank of Spain, the financial institutions showed a surplus in their financial operations of 2.3% of GDP, in accumulated terms over four quarters.

Together with the positive outstanding balance obtained by households (1.8%) and by non-financial companies (1.6%), it explains that during this period the Spanish economy had a positive outstanding balance or external financing capacity of 2% of GDP. And that’s despite the deficit or financing need equivalent to 3.6% of GDP of the Public Administrations.

Financial institutions, companies and households have continued to adjust the debt accumulated in the first half of the year.

With regard to non-financial companies and households, this is equivalent to 164.2% of GDP, with an annual drop of 7.1%. This is 100.6% of the GDP of companies (non-consolidated debt) and 63.6% in the case of households. In both cases, the figure is increasingly closer to the European average, against a backdrop of greater economic growth and preference for home ownership. All the above leads us to believe that the process of private debt adjustment may be nearing an end.

There is another figure worth highlighting in the Bank of Spain’s report on the Spanish economy’s financial accounts published on Monday. The financial assets of households and NPISH totalled 2.144 billion euros at the end of the first quarter, up 5.2% year-on-year: 189.2% of GDP, 3,2 percentage points above the previous year’s figure. Net financial assets, deducting financial liabilities, amounted to 120.6% of GDP, 6,4 percentage points above the June 2016 figure.

And now it’s not just that the financial conditions offered by the banks are very favourable. They also offer the products and financial services to enable the rest of the institutions to make better decisions in terms of financial management.