Spain debt rating upgraded with a positive outlook

Spain's fledgling economic recovery has now been recognised by credit agency Moody's

International rating agency Moody’s has upgraded Spain’s economy by one notch, a move that reflects the country’s careful rebalancing of its economy and the introduction of more flexible labour laws – the effects of which have created a more sustainable growth model.

While this is good news indeed for Spain’s economy, the fact that the country has been upgraded from Baa3 to Baa2 shows that there is still plenty of work yet to be done before ministers can claim that Spain is truly out of the woods…

Europe’s strongest economies – such as Germany, the Netherlands and Belgium – enjoy across-the-board AAA* ratings, with the UK also in the top echelon of countries with exceptional creditworthiness.

For Spain, Moody’s stated that the country’s budget deficit is still having a restrictive effect on its creditworthiness, while its debt-to-GDP ratio of 94 per cent is expected to hit 102 per cent by 2016 before easing off.

Still, despite the warnings, Moody’s report was largely complimentary of the way Spain’s economy had moved away from a reliance on real estate investment towards a more balanced economic model rooted in exports and the nurturing of more entrepreneurial efforts.

Wage moderation and more flexible labour laws have made it easier for companies to attract the appropriate talent, while Spain’s own government has enjoyed improved market access having proven to the EU that it no longer requires bailout funds or external financial assistance.

“In Moody’s view, this situation has been driven to a large extent by the European Central Bank’s policy announcements and actions, but also by the evident improvements in the Spanish economy and the government’s track record of policy implementation,” said Moody’s report.

So what could all this mean for the average Spaniard, or indeed Brit looking to buy a property in Spain? Well, the key word here is confidence. While not much will change in real, tangible terms (at least not immediately), investors, governments and the general public will begin to look more positively on Spain’s economy, which can lead to looser lending criteria among banks, which can in turn help oil the wheels of further economic recovery, improve access to mortgages and boost the hospitality sector.