Spain finally leaves recession, but growth is still flimsy

After more than two years of full recession and financial turmoil stretching back to 2008, Spain has finally inched its way back to economic growth of 0.1 per cent in the third quarter of 2013, its central bank reported today.

Spaniards are crossing their fingers that the country’s first globally positive data for its economy since 2010 means a definitive end to the county’s worst recession in modern history - which has destroyed more than seven percent of its GDP, seen unemployment rocket to 26 per cent and wrecked a decade-long property bubble.

Soaring exports, a strong tourism industry with record numbers of foreign visitors and rapidly increasing foreign investment, particularly in the property market, have all contributed to Spain’s economic turnaround. And following two years of deeply unpopular and far-reaching cuts in public spending, the news of the end of Spain’s recession will also provide a much-needed morale boost for Prime Minister Mariano Rajoy and his politically beleaguered government.

That renewed optimism is shared by foreign investors - amongst them Bill Gates, who recently announced he would be buying a six per cent share in top Spanish construction company MCC.

However, the damage caused by the recession will be very hard to repair. House prices that are an average of 30 percent lower than they were in 2008 may be good news for foreign buyers - but not necessarily for millions of Spaniards with mortgages.

One of Spain’s top charities, Caritas, reported last week that more than three million Spaniards - double the number than when the recession began in 2008 - are now living in extreme poverty, on less than 307 euros a day.

3.7 million jobs lost since 2008, while as many as 5,500 more jobs are in serious danger at leading electrodomestic company Fagor, after it filed for bankruptcy protection, so optimism about the economy at grassroots level is hard to find. Memories of 2010 and 2011, when the Spanish economy briefly spluttered into life with growth of 0.3 percent before falling into a double-dip recession, are still very fresh.

“Borrowing is still very difficult for families and without credit, domestic consumption will not be reactivated, and without consumption, employment will only grow at a snail’s pace,” Juan T. Delgado, the right-leaning El Mundo newspaper’s economics editor warned yesterday.

While the government is expecting a drop of just 0.8 per cent unemployment next year, the IMF predicts it will remain at 25 percent until 2018.