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ECONOMY

S&P upgrades Spain’s rating to ‘A-‘ citing growth

S&P Global has lifted Spain's rating to "A-" from "BBB+" and assigned the country a positive outlook citing its "overall economic and budgetary performance" which has not been hampered by political tensions in Catalonia.

S&P upgrades Spain's rating to 'A-' citing growth
File photo: AFP

“We expect Spain's GDP will expand faster than the eurozone average over 2018-2021, and that the government's budget deficit will continue to shrink,” it said in a statement.

“As a result, we are raising our unsolicited long-term sovereign credit ratings on Spain to 'A-' from 'BBB+' and assigning a positive outlook,” it said.

Another ratings agency, Fitch, had upgraded Madrid's sovereign debt rating in January.

“The positive outlook signifies that we could raise our ratings on Spain within the next 24 months if the government achieves greater consolidation of public finances than we currently expect,” S&P said.

“Further easing of political tensions in Catalonia would also support an upgrade,” it said.

Catalonia, which was previously an autonomous region, remains under direct rule from Madrid, which was imposed after the region declared independence in October.

The move came after Spain's central bank this week increased its growth forecast for 2018 to 2.7 percent from 2.4 percent as the government plans to reduce income tax for some workers and hike wages for civil servants.

It said this reduction in the tax burden would however lead to a slower drop in the public deficit this year, which it predicts will reach 2.5 percent of GDP — still below the 3.0 percent limit set by the European Union.

The Spanish government had planned for a deficit of 2.3 percent in 2018.

The central bank also predicts economic growth will be slightly higher than expected in 2019.

In a statement, it put stronger growth down to debt reduction in the private sector and a current account surplus.

It is also expecting a general drop in the tax burden on people in Spain.

The government is expected to adopt its budget for 2018 at the end of March, very late due to the secession crisis in Catalonia. This will then be submitted to a vote in parliament.

READ ALSO: Spain's credit rating gets upgrade thanks to rosier economy

ECONOMY

Spain’s middle-class youngsters the most likely to end up poor across all EU

Spain leads the ranking of EU countries with the highest risk of young people ending up in poverty as adults, despite coming from families without economic difficulties.

Spain is the fourth EU country with the highest inherited poverty
Spain is EU country with most middle-class young people who end up poor. Photo: Jaime ALEKOS / AFP

Spain is also the fourth EU country with the highest rate of inherited poverty risk, according to Eurostat, the EU Statistical Office.

Data on intergenerational poverty indicates that there is a correlation between the financial situation of the household you grew up in and the risk of being poor when you reach adulthood and in Spain, there is a strong link. 

The latest statistics available from 2019 show that the at-risk-of-poverty rate for the EU was 23 percent among adults aged 25 to 59 who grew up in a poor financial situation at home when they were 14 years old. This is 9.6 percentage points more than those who come from families without financial problems (13.4 percent). 

READ ALSO: Spain’s inflation soars to 29-year high

How the situation in Spain compares with the EU

Spain has become the EU country with the highest risk of poverty among adults who grew up in families with a good financial situation  – 16.6 percent.

This was followed by Latvia with 16 percent and Italy with 15.9 percent.

That statistics also show the countries where it is less likely to be poor after growing up in households without economic difficulties. These include the Czech Republic (5.9 percent), Slovakia (7.9 percent) and Finland (8.5 percent).

The overall poverty rate in the EU decreased by 0.1 percentage points between 2011 (13.5 percent) and 2019 (13.4 percent), but the largest increases were seen in Denmark (1.9 points more), Portugal (1.8 points), the Netherlands (1.7 points) and Spain (1.2 points).  

On the other hand, the biggest decreases in the poverty rate were seen in Croatia (-4 percent), Lithuania (-3.6 percent), Slovakia (-3.5 percent) and Ireland (-3.2 percent).

READ ALSO: Spain’s government feels heat as economic recovery lags

Inherited poverty

The stats revealed that Spain was also the fourth country with the highest rate of inherited poverty risk (30 percent), only behind Bulgaria (40.1 percent), Romania (32.7 percent) and Italy (30.7 percent).

This means that children of poor parents in Spain are also likely to be poor in adulthood. 

The countries with the lowest rate of inherited poverty risk were the Czech Republic (10.2 percent), Denmark (10.3 percent) and Finland (10.5 percent).

The average risk-of-poverty rate for the EU increased by 2.5 percentage points between 2011 (20.5 percent) and 2019 (23 percent), with the largest increases seen in Bulgaria (6 points more), Slovakia and Romania (4.3 points), Italy (4.2 points) and Spain (4.1 points).

The biggest drops were seen in Latvia (-8.5 points), Estonia (-8.0 points) and Croatia (-2.3 points). 

The largest gaps in people at risk of poverty when they reach adulthood were in Bulgaria (27.6 percentage points more among those who belong to families with a poor economic situation as teenagers compared to those who grew up in wealthy households), Romania (17.1), Italy (14.8), Greece (13.5) and Spain (13.4).

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