Spain economy grows at fastest rate for seven years

The Spanish economy has recently made headlines across Europe and the USA, and for once, it was for all the right reasons.

Media outlets from the Financial Times to the Daily Telegraph and Reuters all reported that Spain’s economy has just posted its best figures for seven years, with various reports suggesting that Spain is now performing better than at any point since 2007…

Data published at the end of January revealed that the final quarter of 2014 saw Spanish GDP grow by 0.7 per cent, continuing the trend that has seen the country’s economy grow for the past six straight quarters.

Overall, 2014 saw the Spanish economy grow by 1.4 per cent – a performance that outstripped experts’ predictions and lends further credence to the Spanish Prime Minister’s claims that the economy will grow by more than two per cent this year.

Should Spain achieve such growth then it would become the fastest-growing major economy in the eurozone in 2015, with only the UK economy set to outperform it. “The increasingly broad-based recovery suggests Spain is well positioned to take advantage of supportive factors in early 2015, namely lower energy costs, a weaker euro, and a cut in personal and corporate taxes,” Raj Badiani, analyst at IHS told the Financial Times.

The country’s economic recovery was initially kickstarted around 18 months ago when lower wages attracted foreign investment in industry and the automotive sector, which in turn helped drive Spain’s export market. Today, however, recovery is stemming from a number of sources, say analysts at investment bank Morgan Stanley.

“Consumer spending and business investment are contributing to the recovery a great deal,” the bank’s analysts wrote in a recent report. “This is a development for the better, because for about a year the recovery has been solely reliant on one engine: exports. Now there are two engines: exports plus domestic demand.”

The current government has earned hard-won praise for engineering this economic turnaround, having introduced a raft of tough and often painful reforms over the past three years designed to cut spending, lower overheads and inject confidence into the economy.

These measures of austerity are hardly vote winners, which is why some economists are concerned about the upcoming general election, which is set to pit the incumbent – Mariano Rajoy – against the anti-austerity party Podemos, which opposes the budget cuts imposed on the country.

However, chief European economist at Nomura International, Jacques Cailloux, has remarked that Spain is moving in the right direction, despite “playing catch-up” with many of Europe’s other leading economies.