Spain

Current Economic Outlook

As Spain endures the unravelling of a decade‐long boom, RGE confirms its forecast of a 4% contraction in GDP during 2009 with a further ‐1% fall occurring in 2010. The second half of 2010 should witness modest growth, stimulated primarily by a recovery in global trade. Spain’s prolonged contraction will be fed by structural imbalances which still exist within the economy, exacerbated by increasing unemployment, constrained consumer spending and a collapsed real estate sector. Spain’s high private sector debt levels amplified the effects of the global downturn. Some positive developments, including lower interest rates and prices, fiscal stimuli, improved confidence, and an easing of credit markets have occurred. But challenges remain for the Spanish economy throughout 2010. The depth of the recession has eroded public finances and RGE still expects the deficit‐to‐GDP ratio to reach 10% by the end of 2010. Stabilization in Spain will be heavily constrained by high unemployment, low consumption and rising public debt, all of which increase the likelihood of a U‐shaped recovery occurring.

Read the latest RGE Global Economic Update.