The Spanish economy is now seeing its growth numbers seen since the recession. That positive change has arrived hardly means that all the problems are rapidly fading.
Unemployment remains at a record high and the number of people in financial distress has been mounting every month. The bottom line is that Spain has been boosted by two factors that are worrisome to many others. The low value of the euro has been great for a country that still relies pretty heavily on manufacturing and the ability to export these goods. The Spanish sell extensively to Latin America and to the United States. Therein, the weak euro has been very helpful. Then there is the fact that oil prices have been low, causing some real savings regarding energy consumption.
Still, Spain needs a great many of its economic sectors to rebound and right now there is some sign of that taking place. It has not only been the manufacturing community, but tourism has benefited from the weak euro—Spain is a decent place for a bargain trip these days.
The country has a very long road to travel to regain economic momentum lost during the last recession, and it is not at all clear that voters will be that patient. Local elections will be held in a couple of months, and most predict that protest parties and populists will gain positions. An even-more critical impact could come during national elections later in the year. Right now, the dominant parties are desperately trying to point out that things are getting better and that all that is needed is some more time. It is not all that clear that the population of Spain is going to give them that opportunity.
- Chris Kuehl, Ph.D., NACM economist