Spain: high unemployment clouds forecasting
With 2013 recently rung in, the Spanish economy
continues to digest – slowly – the excesses of the past,
punctuated by flighty decisions and skimpy transpar-
ency when it came to revealing the real state of the
financial system. The headline economic figures and the
unemployment scourge do not invite optimism near
term. However, there are a few green shoots which may
not be fully priced in:‘we can’t see the forest for the trees’,
or at least a nice part of the forest, we might say.
Analysing the current state of the Spanish economy
reveals actual and projected contraction in spending
and investment in 2012 and 2013. Significant contraction
in the latter instance. Contractions driven by increased
unemployment and public benefit and service cuts,
which are undermining disposable household income
and company profits in what has become a vicious
circle. Asset deflation (physical and financial assets) and
the widespread contraction in credit constitute another
two factors that are shaping this deep crisis: the govern-
ment’s call to trust that the reforms being rolled out will
pay off longer term is coming up against the reality on
the ground and the harsh economic environment.
The Spanish economy is gaining competitiveness in a recessionary
environment that compromises compliance with short and medi-
um-term deficit targets. Towards the end of 2012, the debt markets
began to give off more positive signals regarding Spain, which would
appear to remain intact year-to-date.
Commitment to Latin America, the 14th Latibex Forum
Annual
Report 2012
/ BME
18
Market Environment
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