It’s straight out of the textbook that low inflation – and above all deflation – has negative effects on economic growth that we all know about. That’s the main reason why ECB President Mario Draghi implemented an ambitious set of monetary expansion measures in March, with the aim of boosting prices to a level more suitable for economic growth, namely 2%.
Maximising profits is the main objective of any company and the banks are not alien to this situation. The current scenario is particulary challenging for the profitability adjustment of the sector in Europe and the adjustments made by the Spanish banks are proof of this.
Public investment grew 21% to 26.545 billion euros last year, according to data corresponding to end-2015. This was the first increase since 2009. It accounted for 2.5% of GDP in 2015. The autonomous regional governments were the ones which saw the most investment and the biggest year-on-year rise.
F. Barciela/ F. G. Ljubetic | Labour costs in Spain stagnated during the crisis, but the idea that they eventually have to rise again has quite a few supporteres, including many businessmen. It would even be a postive driver for consumption and the economy general.
Ofelia Marín-Lozano | Spain’s public deficit stood at 5.18% of GDP, missing the target set by Brussels (4.2%) by one percentage point. So the deficit should not be higher than nominal GDP growth, which can be estimated at around 3% in the long term.
In the early years of the crisis, Spain’s capital markets and banks suffered severe financing restrictions, but since then access to funding has been slowly re-established for big companies, as well as for SMEs and families. And analysts believe this is now functioning normally.
F. Barciela / F.G. Ljubetic | The crisis forced Spain’s banking industry to cut its number of branch offices from 46,000 in 2008 to 31,000 at end-2015, the lowest figure since 1983. But now it’s technology, the Internet and mobile which will force the banks to continue reducing their branch networks. This is a challenge facing banks across Europe and the US.
Spain overran its deficit goal by one full percentage point last year. While the caretaker government puts the blame on regions under opposition control, such as Catalonia and Valencia, rival parties adamantly attack its budgetary record.
Spain’s tourism sector is on course for another record year in 2106, if the January figures are anything to go by. It looks like Spaniards are going to be on the move at Easter, both at home and overseas, taking advantage of currency depreciations in tourism destinations like Brazil.