Spain

Q1 2010 Spain Outlook

Spain will continue to feel the force of the recession well into 2010 as GDP will contract a further 0.5% annually. A decade-long boom driven by low real interest rates, a compression in currency risk premiums and ample credit availability has unraveled. Labor intensive sectors such as construction were hit worst. Structural rigidities in the labor market with distinct insider-outsider features further exacerbate the rise in unemployment, which reached 19.4% in November 2009. RGE expects the unemployment rate to hit the 20% mark and recede, slowly, over the years. This will dictate the consumption and precautionary savings pattern in 2010. This precariousness, especially for young workers, poses a danger for the future development of the knowledge based economy.

Fixed investment, including in equipment and construction, contracted sharply in 2009 by 15.5% y/y of GDP in Q3 2009, followed by a substantial...

Read the Q1 2010 Spain Outlook.