Spain Raises its Forecast for Economic Growth

Recently, Spain has surprised many economists by raising its forecast towards a more positive economic growth for this year and the following year. This provides a sharp contrast to other countries in the eurozone that are currently struggling quite significantly. For example, France and Italy have lowered their economic outlook for the coming year and Spain was supposedly just as socialist and backwards.

Just because you are doing better than France and Italy does not mean there is nothing to cheer about.

Recently, Spain has surprised many economists by raising its forecast towards a more positive economic growth for this year and the following year. This provides a sharp contrast to other countries in the eurozone that are currently struggling quite significantly. For example, France and Italy have lowered their economic outlook for the coming year and Spain was supposedly just as socialist and backwards.

Just because you are doing better than France and Italy does not mean there is nothing to cheer about.

Spain is Moderately Shining

Spain has managed to emerge, somewhat, from the deep recession it has experienced, marked by severe unemployment rates, a banking crisis, and a slump in the property market. Now, many are suggesting that Spain could be offering one of the best economic performances in the eurozone this year. Where France has seen growth stagnate, and Germany has begun to see its economy contract by 0.2% in the second quarter, Spain is starting to flourish, thanks in part to increased exports.

As most people are already aware, Spain experienced a serious financial drop in the 2008 financial crisis, followed by a fantastic recession. The crisis itself arose from the collapse of a building boom during 2008 that threw millions of people out of work and plunged Spain into a double recession. As a result, the economy began to decline steeply, with unemployment numbers soaring, and property prices collapsing.

Since the Spanish civil war from 1936 to 1939, 2008 marked Spain’s worst recession in years. In an attempt to stabilize public finances and boost the economy, the conservative government in Spain pushed labor reforms and budget cuts that lead to huge protests. However, in spite of all of this, the country has now emerged as a shining star in 2014.

The Current Forecasts for Spain

The financial ministry for Spain has published reviewed forecasts of 1.3% growth for 2014, and 2% growth for 2015. Although this is not too dramatic of an improvement from the earlier estimates of 1.2% for this year and 1.8% for 2015, it does show a positive change.

Importantly, unemployment rates within Spain are expected to ease to approximately 24.2% this year, and 22.2% in the following year. This is still terrible though and it shows how standards are so low in contemporary times.

After six years of job destruction that was prompted by the collapse of the construction boom in 2008, jobs may be making a comeback. The government announced that almost 622,000 jobs would be released into the market by the end of 2015, leading to an employment growth of 0.7% this year, instead of 0.6% as seen in April. In 2015, employment is expected to grow by 1.4%.

Many people believe that if Spain cut taxes, stopped anti-business practices, cut socialized health care system, it could see tens of thousands of new jobs created. Until this happens, Spain’s economy will continue to be just a little better than some of its neighbors.

Back to Reality

Despite the positive news, the Spanish government has expressed caution against too much optimism. The country itself is still facing serious financial challenges; including being a part of a eurozone that currently seems to be spiraling into serious deflation, poor growth, and joblessness. Inflation has remained stubbornly low throughout the region, with Germany contracting and France flat-lining this year.