Spain’s economic outlook improves

Spain’s economic outlook for 2014 and 2015 has improved. On Friday, Spain’s government forecast that GDP would grow by 1.3% this year, compared to 1.2% in a previous forecast.

Spain took a severe beating from the 2008 financial crisis and the Great recession that followed. The economy declined steeply, unemployment went through the roof, and property prices collapsed. The country was mired in its worst recession since the Spanish Civil War for several years.

In 2014, it has emerged as one of the best-performing economies in the Eurozone. The government says rising exports have helped drive GDP growth.

The government cautions against over-optimism, warning that the country faces serious challenges, including a Eurozone that appears to be sliding into a spiral of deflation, joblessness and zero growth.

Eurozone inflation has been moving further and further away from the European Central Banks 2% per year target. Last month it posted annual inflation of just 0.4%. The French economy is not growing, Germany’s GDP shrank in the second quarter, while the Eurozone posted zero growth.

In a press conference on Friday, Economy Minister Luis de Guindos said:

“The figures show that we are in a process of accelerated recovery, in which the recent worsening of the European economy has been incorporated.”

On Friday, the Spanish government delivered a cautious budget for 2015. Spending will not rise, despite a general election in 2015. Pensions will increase by 0.25%, while the number of bureaucrats is set to decline.

According to Spanish newspaper El País, unemployment by the end of this year will be 24.7%, a slight reduction on the government’s previous prediction of 24.9%. It also expects there will be 0.9% (348,200) more jobs by the end of 2014. By the end of 2015, it forecasts an unemployment rate of 22.9%.