2018 Analysis of the Spanish Economy: There Is Economic Recovery in Spain, But...

The global financial crisis reverberated throughout the global economy. Some countries were able to recover more quickly. Much like Greece, the Spanish had a terrible time getting past its recession. It is true that the Spanish Economic Crisis technically ended in 2014. It nevertheless took until this year for the Spanish economy to make a full recovery, as the International Monetary Fund's (IMF) latest Article IV Consultation report illustrates released earlier this week, as did the upgrading of Spain's credit rating from Moody's and Standard & Poor's earlier this year. That was the upside from the IMF report: the Spanish economy is on the mend.




The Spanish economy has many good things going for it. Employment growth is exceeding that of the rest of the Euro area (IMF, p. 4). Employment decreased to 14.7 percent in 2018 from 26.1 percent in 2013 (IMF, p. 5). Monetary policy is accommodative enough to help correct remaining imbalances (OECD). Any economic impact from the uncertainty surrounding Catalonia has been largely confined to Catalonia (IMF, p. 5; also see my 2017 analysis on Catalonia). Low financing costs and improved profit margins are boosting business investment (OECD). Spain became the second most visited country in 2017, even surpassing the United States (IMF, p. 6). Property prices are recovering from a low level (IMF, p. 7), which is important considering one of the major causes of the Spanish Economic Crisis was due to the housing market. The number of non-performing loans is declining, a fact that is in contrast to an Italian economy that is dealing with the adverse effects of a high percentage of non-performing loans.

In spite of these indicators, there are some concerns regarding the Spanish economy. Spain is still dealing with major long-term unemployment and youth unemployment issues (OECD). GDP growth is expected to moderate (IMF, p. 4). Public debt remains at 100 percent of GDP, and doesn't show signs of significantly diminishing (IMF, p. 1). The IMF recommends considerable financial consolidation so the problem does not get out of hand (IMF, p. 10). I hope the Spanish government deals with its fiscal issues so it does not open itself to the craziness the contagion effect from Brexit or the Italian budget debacle.

For more reading on the state of the Spanish economy, please consult the links below.

Major Sources of Information
Banco de España Economic Analysis (in Spanish)
BBVA Research
European Commission
Focus Economics
Heritage Foundation
IMF Article IV Consultation report
Organization for Economic Cooperation and Development (OECD)
Rabo Research