BARCLAYS | Spain has undergone considerable structural changes over the past four years. Stronger banks, more competitive firms and a labour market in recovery mode all support a brighter outlook.Ahead of the 20 December general election, we review the near- and medium-term growth and evaluate progress in the labour market, the private- and public-sector deleveraging process and the country’s international competitiveness.
Abengoa’s expulsion from Spain’s Ibex 35, after finding itself on the brink of bankruptcy, has provoked a tough fight amongst companies and sectors which consider they have the right to belong to this exclusive index. One of the most active sectors is real estate, now recovering from its 2008 collapse.
Miguel Navascués | Junk labour contracts in Spain were created by the former Socialist Prime Minister Felipe González in 1984. At that time, González fought against the trade unions to introduce the temporary work contract. This proved to be of no use, as unemployment had increased to about 23% by the end of his term in office in 1993.
In the last six years, the Spanish banking sector’s return on equity (ROE) has fallen by 6.8 percentage points from 12.1% to 5.3%, mainly due to increased capital requirements. But the drop would have been even greater if it had not been for the ECB’s policies. This ROE data coincides with a complaint from Banco Popular chairman, Angel Ron, who said the regulation affecting the financial industry is “abrasive.”
Fernando Barciela | Spanish unemployment fell again in November, reversing a three-month upward trend. Last month, 27,000 fewer people were registered as jobless than in October, taking the total number of unemployed to 4.15 million. This is good news, given that at the peak of Spain’s economic crisis, the jobless rate reached a record 26.9%. There has also been a rise in Social Security affiliations, which increased from 16.3% in 2013 to 17.2% in October 2015.
It’s not really surprising that Spain’s real estate market has become one of the most attractive in the world, given that property prices are still only slowly recovering from an almost 40 percent decline at the height of the crisis, and the country’s economy is now back on the path to growth.
Spain’s public debt stood at 1.062.472 trillion euros at the end of September, representing 99.4% of GDP, and compared with the government’s full-year 2015 target of 98.7%. But is this debt burden really so heavy, when the average cost of debt stood at 0.87% at the end of October, compared with 1.52% in December 2014?
Last night, the leaders of the Ciudadanos and Podemos emerging parties joined forces to deliver a scathing bashing to the Socialist candidate during the debate held as a foretaste of the Spanish General Elections on December 20th. Spanish Prime Minister Rajoy judiciously declined the invitation to assist at the expected slaughtering.
The picture of the Spanish economy is changing thanks to the international activities of its companies, which has been increasing since the end of last year. Those firms which already operate overseas are expanding their business, but there is a risk that the uptick in domestic demand could dissuade new companies from leaving their home market.
The National Statistics Institute published last Thursday the breakdown of third quarter GDP, which has been estimated as having grown 0.8% in the quarter (3.4% year-on-year). This data once again stands out in the euro area, despite the fact it implies a deceleration from the 1% registered in the previous quarter. But key analysts believe that good short-term results should not cloud the fact that there are still areas of Spain’s economy which need to be improved.