Spain’s economic growth surpasses UK

Spain’s economic recovery is set to continue, with the country on course for an impressive 3.2% growth in GDP this year.

The Spanish economy grew by 0.9 per cent in the second quarter of the year, outstripping Britain’s own recovering fortunes in the process.

The UK – which is enjoying the benefits of a strong pound and falling jobless rates – grew by 0.7 per cent in the second quarter of the year, but was surpassed by the Spanish juggernaut that is on course to grow by around 3.2 per cent this year…

This is Spain’s fastest growth since the beginning of 2007, and represents the eighth consecutive quarter – two whole years – in which the economic situation has improved notably.

From many years in the red, Spain now appears to have turned a corner, with the third quarter of 2013 marking the point that recovery was first established. This has been underpinned by a series of tough labour reforms and economic measures, and has been aided by a wider recovery of Europe’s fortunes that has seen foreign money return to Spain, largely in the form of consumer spending and property investment.

The weak euro is tempting more and more Brits to Spain, and is also helping the country’s exports, particularly automobiles, olive oil and wine. In turn, Spaniards are beginning to reap the benefits and have begun loosening the purse strings domestically.

“We believe consumers continued to ratchet up their spending on services and non-essential spending, calmed by the unfolding recovery in both the economy and labour market, and spurred on by competitive pricing in tandem with increased purchasing power to release some pent-up demand,” said IHS Global Insight economist Howard Archer.

As ever, economists were on hand to issue the requisite warning that Spain is not out of the woods just yet, pointing once more to the country’s high unemployment levels, particularly among the young.

“There remain structural economic issues which need to be corrected,” said Global Market Strategist at JP Morgan Asset Management, Nandini Ramakrishnan. “Unemployment is still rampant, especially among those under the age of 25. If Spain can’t get a handle on its employment situation through necessary reforms then internal demand might not be strong enough to sustain the country’s predicted recovery.”

The analyst added that political stability has proven a key ingredient to the country’s reform, suggesting that autumn’s general election could prove to be one of the most important that Spain has held in a generation. The current Prime Minister, Mariano Rajoy, is hoping that this encouraging data will serve to convince voters that his Partido Popular (PP) centre-right government is best placed to continue Spain’s economic upturn. PP’s opposition is the leftist Podemos Party, which has seen its support wane slightly after a strong emergence in 2013.