• Spain's news in English
 
app_header_v3

FOCUS: IMF praises Spain's 'virtuous circle'

AFP · 25 Jan 2015, 09:35

Published: 25 Jan 2015 09:35 GMT+01:00

The International Monetary Fund raised its growth forecast for just two nations -- Spain and the United States -- in its gloomy quarterly World Economic Outlook report released on Tuesday that lowered global growth forecasts.

It predicts Spain's economy will expand by 2.0 percent this year, in line with the Spanish government's forecast, up from the 1.7 percent growth it projected in October. The IMF left its 2016 forecast of growth unchanged at 1.8 percent.

"There has been a substantial improvement in competitiveness, due both to an increase in productivity and to a decrease in wages. So, exports in Spain are doing well. That's helping," IMF Chief Economist Olivier Blanchard said after the report was released.

Spain, the eurozone's fourth-largest economy, was plunged into chaos in 2008 when the global financial crisis hastened a correction that was already under way in its once-buoyant property sector.

The country has since 2012 introduced major reforms of its labour laws which make it easier for employers to lay off workers or reduce wages which has "greatly improved its competitiveness", economist Jesus Castillo of French investment bank Natixis told AFP.

Consumer spending also increased last year as Spaniards became more optimistic about the economy with retail sales up over Christmas.

"These two factors have the effect of increasing growth," said Blanchard. "In situations like this, there is a virtuous circle to it, which is more confidence in the future leads to more investment, more consumption."

The slump in the euro currency has made exports from Spain to markets outside the eurozone cheaper while a drop in oil prices has also helped give the country, which imports 80 percent of its energy, a boost.

Economy Minister Luis de Guindos estimates falling oil prices could save Spain up to 15 billion euros ($17 billion) this year.

He told private television Antena 3 on Friday that his conservative government -- which is facing a year-end general election -- may raise its 2.0 percent growth forecast for 2015.

But, Spain's sky-high jobless rate remains a major drag on the country's economic turnaround, said Castillo.

"Can we say that the crisis is over? No," he said.

Joblessness fell to 23.7 percent last year from 25.7 percent as Spain's large services sector took on more staff, driven by a strong tourist season, the National Statistics Institute said Thursday.

But the rate remains the highest in the European Union after Greece, and the International Labour Organization predicts it will remain above 20 percent until the end of the decade.

"The unemployment rate in Spain is still much too high," said Blanchard. "In Spain, as in many others countries, this is leading to the rise of parties that either do not want to be part of the euro or have populist positions. That's something that we have to worry about," he added.

Story continues below…

Anger over graft and frustration after six years of economic turbulence have shaken up the two-party system that has dominated since Spain emerged from dictatorship in the 1970s. 

A fast-growing far-left party set up in January 2014 called Podemos, which backs public control over certain sectors of the economy and a 35-hour working week, tops polls of voter sentiment.

Podemos leaders hope that a win for their Greek allies Syriza in Sunday's general election will help boost support for their party. But the party's rise has so far not shaken investor confidence in Spain, said Miguel Cardona, chief economist for Spain at the nation's second-largest bank, BBVA.

"We don't see any negative effect on the volume of investment," he told AFP.

For more news from Spain, join us on Facebook and Twitter.

Your comments about this article

Today's headlines
Franco finally stripped of mayor title by Catalan town
Spanish dictator Francisco Franco. Photo: AFP

Better late than never...

Why Nigeria is furious over Spain's wasteful tomato fiesta
Nigerians in the grip of a tomato blight are furious over Spanish wastefulness. Photo: AFP

A small town in eastern Spain has become the object of derision from Nigeria for its shocking wastefulness of tomatoes for the sole pursuit of fun.

Police sieze haul of elephant tusks from Madrid home
74 elephant tusks were discovered in the home. Photo: Spanish Civil Guard.

The Spanish Civil Guard discovered 74 elephant tusks at a residence in Madrid.

Stunning cave paintings found 300 metres below Spain
Archeologist Diego Garate with the cave paintings in Atxurra. Photo: bizkaia.eus

The once in a generation find has been hailed as one of Spain’s most important prehistoric discoveries.

Spain has 58 bathing spots that don't meet EU standards
Photo: AFP

But don't worry there are 1,821 bathing spots that meet the excellent quality standard.

Fleet of jets take Madrid fans to Champions League final
Atlético Madrid fans. Photo: Gerard Julien/AFP

More than 200 charter flights have been laid on to take fans to Milan for the all-Madrid final of the Champions League.

DNA from ancient Phoenician shows Iberian ancestry
Young Man of Byrsa. Reconstruction: University of Otago

The man likely came from modern day Spain or Portugal, researchers have revealed.

Pole dancer from Spain makes bid for British stardom
Saulo Sarmiento is a pole dancer for Cirque Du Soleil. Screen grab: Britain's Got Talent/YouTube

Saulo Sarmiento got pulses racing during his audition for Britain's Got Talent, but who is the man behind the moves?

Police backtrack over fine for 'All Cats Are Beautiful' bag
The offending bag and the fine issued over it. Photo: Bélen Lobeto

Police have admitted that perhaps the phrase "All Cats Are Beautiful" isn't quite as offensive as first thought.

Brit historian Mary Beard wins prestigious Spanish award
The award will go nicely with Beard's OBE (pictured above). Photo: John Stillwell/AFP

The British academic is to follow in the footsteps of Sir David Attenborough, Bob Dylan and Margaret Atwood.

Lifestyle
Top Ten: Barcelona's coolest rooftop bars
Sponsored Article
Eat, learn, live: unforgettable holidays in France
National
Plane forced to dodge THREE drones to land in Bilbao
National
Spain launches campaign to stop English 'invasion'
Culture
Ten unique Basque words you need to learn right now
National
'It’s time to dig up Franco' say victims of Spain's dictatorship
Lifestyle
'Severe jellyfish stings' end Brit's Spanish swim feat
Sport
5 reasons why Spanish clubs dominate European football
International
Tesco to bring British tea and biscuits to Spanish stores
Culture
Bucket list: 16 brilliant things to do once in your life in Spain
National
Spain's Civil War victims to be exhumed from Franco's tomb
National
Two mums face jail for leaving kids in car to go out drinking
Education
Students at Spanish college forced to take exorcism class
National
Ten superb reasons why you need to visit San Sebastián
Society
Abused wife saved by hiding SOS note in son's homework
National
Look up! Rare meteor shower set to dazzle skies over Spain
Politics
Why Spain is heading for a Groundhog day election
Travel
Ibiza bans drinking in street… and that includes water
National
Expats didn't 'abandon' UK so ALL Brits should get EU vote
Features
What's on in Spain: May 2016
Travel
Discover Spain's breathtaking national parks
National
Couple caught on camera having sex on metro platform
National
Spain's stunning locations for Game of Thrones Season Six
National
Ten delicious Spanish dishes you must try before you die
3,357
jobs available