• 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
Everyone loves Spain: Tourist numbers break new record
2016 is set to be a record breaking year for tourism. Photo: AFP

More than 10 million tourists visited Spain in August, setting a new record for visitor numbers.

Catalan leader wins backing for independence referendum
Carles Puigdemont won support for a referendum. Photo: AFP

Catalonia's regional president won a confidence vote to hold a Scottish-style referendum on independence next year.

 Spanish police seize over 100 tonnes of contraband tobacco
Over 100 tonnes of tobacco was seized. Photo: AFP

Spanish police have seized a record 100 tonnes of contraband tobacco worth €16 million ($18 million) and arrested 13 people suspected of selling it over the internet.

The Local list
Ten great reasons to discover the real Malaga right now
Malaga's modern port. Photo: Nick Kenrick/Flickr

Autumn is a great time to discover Spain's southern city of Malaga.

Spain in eye of a perfect storm after 10 months without govt
Photo: AFP

Spain is going through one of the worst political storms in its modern history.

Ten incredible Spain locations for Game of Thrones season 7
Photo; Carlos Olmedillas / Flickr

Filming for Game of Thrones season 7 gets underway in Spain in October. The Local takes a look at the special places chosen for the next episodes in the epic HBO drama.

Catalan leader promises 2017 independence referendum
Photo: AFP

The president of Catalonia vowed to hold a referendum on independence next year, whether Spain allowed it or not.

Spain's stricken Socialist party hit by 'coup' attempt
Pedro Sanchez is under pressure to resign. Photo: AFP

Spain's Socialist party was hit by a "coup" attempt on Wednesday with half of its leadership quitting in a bid to oust leader Pedro Sanchez and unblock the country's political deadlock

British mother arrested for leaving child to party till dawn
The mother went clubbing until dawn leaving her seven-year-old alone at the hotel. Photo: AFP

A British mother has been arrested in Mallorca after leaving her child alone overnight in a hotel while she went clubbing till dawn.

Socialists in open warfare as ex-PM blasts Sanchez
Felipe Gonzalez has spoken out against Pedro Sanchez. Photo: AFP

"I feel frustrated... as if I had been tricked," said ex-PM Felipe Gonzalez of the current Socialist leader.

Analysis & Opinion
Why moving to Spain could be the best decision of your life
National
Seven reasons why autumn is the very best season in Spain
International
Spanish study finds four types of personality. Which are you?
National
New search underway for civil war grave of poet Lorca
National
Bison found decapitated on Valencia nature reserve
International
Forgotten Voices: What Brits in Spain think about Brexit
Travel
One dead and 14 injured in blast at Spanish resort
Sponsored Article
Why Jordan is the ‘Different’ East
International
Game of Thrones want extras 'with muscles' to film in Spain
Thousands march in Madrid to push for bullfighting ban
Technology
Spanish team invents hands-free 'penis bidet'
National
In pics: Devastation caused by Costa Blanca wildfires
Society
Pregnant woman in niqab attacked by two men in Spain
National
Spanish café offers cut-price coffee to those with manners
Travel
What's on in Spain: September 2016
Travel
'We drank from animal troughs to survive'
National
Forest fires threaten Costa Blanca resort of Jávea
National
Loyal dog mounts vigil at hospital doors for sick owner
Politics
Five reasons why Spain's Socialists won't back Rajoy
National
It's a girl! Rare giant panda cub born in Madrid zoo
Culture
La Tomatina: Everything you need to know about epic fiesta
National
Shocking video shows torture of young calf during fiesta
Police launch appeal for Costa Blanca hit and run driver
Politics
What political deadlock? Spain economy forges ahead
3,230
jobs available