The Spanish economy grows again after nine consecutive quarters of decline, the Bank of Spain (Banco de España) announced.
In its ”Quarterly Report on the Spanish Economy”, the Bank of Spain announced the long-awaited and welcome news of a gradual improvement in economic conditions, against a background of some easing in financial tensions and improved confidence.
Although growth was seen when comparing the two quarters, the year-on-year rate of change saw a fall of 1.2% in production. Domestic demand also fell 0.3% in Q3 2013, after falling by the same amount during the previous quarter, “while the contribution of net external demand to output rose by 0.4”.
Spanish economy grows but employment still floundering
Although employment continued in its decline, during the last quarter it eased significantly. Quarter-on-quarter employment shrank 0.1%, and 3.1% compared to the same period in 2012.
The Bank of Spain added that Q3 2013 registered the least unfavorable employment decline rate since the crisis began.
Bloomberg BusinessWeek saw the unemployment figures as cold comfort for Spaniards seeking work. It will most likely be many years before unemployment falls from its current record highs. Many young people in Spain have been emigrating to find a future – many analysts do not see this pattern changing in the near future.
Regarding wages and productivity, the Bank of Spain wrote “At the same time, wage restraint is estimated to have continued. In conjunction with productivity, which is expected to slow slightly to 2% year-on-year, this would reduce unit labor costs further.”
The annual inflation rate fell considerably in September to 0.3%, compared to 1.5% in August. Most of this fall was due to the diminishing effects of the VAT (value added tax, sales tax) increase in September 2012, plus unexpected declines in the prices of unprocessed foods.
If one excludes unprocessed foods and energy, the CPI (consumer price index) ended the quarter (September) at 0.8%, compared to 1.6% in August. “The inflation differential vis-à-vis the euro area turned negative (0.6 pp), so returning to levels similar to those before the increases in tax rates and administered prices introduced in 2012.”
The Financial Times quoted Frederico Steinberg, an economist who works at the Real Instituto Elcano, Madrid, who said “This is good news. But we should not be enthusiastic because we still have much to do on the reform front. We still need to increase our competitiveness, we need to ensure that credit starts flowing again, we need further adjustments in the labour market and we have to improve education, research and development and regulation.”
Spanish economy grows after its longest recession as a democracy
One of Spain’s main national newspapers, El País, welcomed the news with a mixture of cautious relief and sadness at the devastating price the country has had to pay during “la recesión más larga de la democracia” (the longest recession as a democracy).
During this “brutal” 5-year recession, Spain:
- now has nearly six million Spaniards with no jobs (in a country with 46.7 million people).
- has lost 3.7 million jobs.
- has accumulated a massive debt.
- has seen its GDP (gross domestic product) shrink by 7.5%.
- has serious problems of poverty and inequality.