The direct impact of the global slowdown in Spain is being offset by the positive indirect effects on private consumption. High GDP growth rates will be maintained in 2015 and 2016, but these will moderate progressively, with economic growth seen falling to 2.8% from 3.1% in 2015 as reported by Bank of Spain last week.
The European Commission estimates Spain’s budget deficit will be 4.5% of gross domestic product in 2015 instead of the required 4.2%. The discrepancy will widen in 2016, with an estimated deficit then of 3.5% of GDP compared with the 2.8% target.
Fernando Barciela | Madrid leftwing Mayor Manuela Carmena (Ahora Madrid) upset the markets and the media last week with her decision to fire credit rating agencies Standard & Poor’s (S&P) and Fitch, effective from 2016.
After seven years of crisis, Spain’s economic model is tending towards what it was in the past. The country ‘s tourism industry is a leader in terms of competitiveness. Furthermore, last summer the sector performed the best it has for a decade.
After recently raising Spain’s sovereign ratings to ‘BBB+’ from ‘BBB’, S&P has also improved its stance on some of the country’s top banks. S&P’s upgrades comes in the same week as the Madrid local authorities said they could not renew the contracts with that agency.
Although the Bank of Spain expects economic growth to slow to 0.8% in the third quarter from 1.0% in the second, international investors are still betting on Spain. Foreign investment outflow fell to 1.5 Bn€ in July compared from 5.5 Bn a year earlier, according to the central bank’s figures.
UBS | The regulator CNMC has kicked off an investigation on the competitive status of the Spanish power generation market. Endesa and Gas Natural Fenosa, the companies most exposed to it.
Spain’s government will change the way the banks’ DTAs are taxed to remove discrepancies with European law. The reform’s impact on the lenders will be €420 M in taxes against €28 Bn of DTAs.
Year 2015, with all the problems and possible scenarios, will mark a new record in terms of listed companies’ earnings, exceeding the 32 billion euros registered in 2014.
Spanish politics will be under the spotlight this week in Europe. The most likely consequence is that Spain’s risk premium will increase and the Ibex will underperform relative to other European stock exchanges.