Spain Emerges from Two Year Recession
Only a year ago, Spain was stuck in the middle of both an economic and constitutional crisis. Madrid had to seek help for its declining banks from eurozone partners. The fragile relationship between Catalonia and the central Spanish government was threatened.
Now, the Spanish economy is slowly starting to mend itself, starting to grow instead of shrink for the first time in nine quarters. State statistics agency INE said that gross domestic product (GDP) was up 0.1%, which may not sound like a lot, but is much more than it has been for the past two years. The stats mean that Spain is finally out of its recession and things are looking up.
One of the worst countries to be hit by the global financial crisis, Spain suffered through street riots and rising unemployment rates. Its second recession in five years led to thousands of companies going bust.
But Capital Economics economist Ben May says that the 0.1% growth “is encouraging, and business surveys suggest there may be more of that to come in the near term.” Mr May said that the mending economy is mainly down to exports, the only area to grow since the recession began, and a busy tourism season that is thanks to the summer weather and political troubles in northern Africa and the Middle East.
Although Spain is the holder of Europe’s highest unemployment levels, they have fallen slightly to 26%, which is promising to the economy regardless of the amount, and could be the shape of things to come.
José Carlos Diez, economist at business school ICADE, warns that the worst may be over, but there is still work to be done if Spain wants fully to emerge from the recession. “It’s good news the economy is no longer contracting, but we’re not out of crisis,” he said.
At one point, Spain’s banks were in quite a severe situation, some of which was due to the Spanish people having less money to spend in the recession. Thankfully, Spain is clawing back its international competitiveness and its banks are just about back in the black.
“We no longer face the reserve and lack of confidence of just a year ago,” said Spanish Prime Minister Mariano Rajoy. “All that’s behind us, but we still have a lot to do. It’s a long way away, but we can see land.”
The economic growth may be starting to build up employment levels, and the government needs a plan in place to push them up even further. This means making sure the workers have the necessary skills, people who have been unemployed for a long time need to be retrained, and education standards need to be raised.
Spain made the right move when they calmed down spending during the recession, but they are not out of the woods yet. The worst is over, and now Mr Rajoy needs to reshape the economy in a way that will make it more sustainable than it has been in the past so that this doesn’t happen again. All the signs are pointing to the light at the end of a long tunnel. Is the Spanish recession over? Yes, yes it is.