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Tags: europe | spain | recession | economy

Spanish Economy Grows for First Time in More Than Two Years

Wednesday, 23 October 2013 01:48 PM EDT

Spain emerged from a two-year recession in the third quarter, strengthening Prime Minister Mariano Rajoy’s efforts to repair the nation’s finances and reduce the 26 percent jobless rate.

Gross domestic product expanded 0.1 percent from the second quarter, when it shrank 0.1 percent, the Madrid-based Bank of Spain estimated in its monthly bulletin. The data, which are preliminary, matched the median estimate of 37 economists in a Bloomberg News monthly survey.

Spain is crawling out of its second recession since 2008 as foreign investors are returning to the nation’s bond and stock markets. Signs of economic growth may bolster Rajoy, half-way through his four-year term, as he tries to convince Spaniards that his unpopular policies will allow the nation to leave the sovereign debt crisis behind it.

“A positive figure for Spain is a big deal from a psychological point of view because it’s the first in a number of quarters,” Ben May, a European economist at Capital Economics in London, said in a telephone interview.

The spread between Spain’s 10-year borrowing costs and Germany’s has narrowed to less than half its peak in July 2012 and the government sold a new 30-year bond this month for the first time since 2009. The 10-year yield was 4.19 percent at 10:13 a.m. in Madrid, compared with a euro-era high of 7.75 percent last year.

Stocks have surged, with the Ibex-35 index of leading companies gaining 20 percent this year, while Microsoft Corp. founder Bill Gates added to the optimism on Oct. 21 by buying a 6 percent stake in Spanish builder Fomento de Construcciones & Contratas SA. Carrefour S.A. Chief Financial Officer Pierre-Jean Sivignon last week said the retailer sees signs of stabilization in Spain.

Rajoy still needs to battle a debt burden that will approach 100 percent of economic output next year and find jobs for the 56 percent of Spanish youths who are out of work. Unemployment will remain above 25 percent until 2018, the International Monetary Fund forecasts.

“In the grand scheme of things, it’s not going to be enough to solve Spain’s existing problems as companies need a period of reasonably solid growth to hire and that’ll take a while,” May said.

Rajoy is depending on exports to drive growth as austerity continues to hold back domestic demand. European Union peers have given him until 2016 to bring the deficit, which was the biggest in the euro region at 11 percent of GDP last year, to within the bloc’s 3 percent limit, amid the deepest cuts in Spain’s democratic history.

While Budget Minister Cristobal Montoro yesterday said Spain is close to generating enough growth to create jobs, the IEE, a research institute linked to the country’s largest business lobby CEOE, this week called on the government to deepen spending cuts and lower taxes to help companies.

Economists surveyed by Bloomberg forecast unemployment in the three months through September will decline to 26.1 percent from 26.3 percent. The National Statistics Institute will publish the quarterly data tomorrow at 9 a.m.

© Copyright 2022 Bloomberg News. All rights reserved.

Spain emerged from a two-year recession in the third quarter, strengthening Prime Minister Mariano Rajoy's efforts to repair the nation's finances and reduce the 26 percent jobless rate.
Wednesday, 23 October 2013 01:48 PM
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