Glimmers of hope for Spain's economy
Spain has emerged from a nine-month contraction, but the outlook remains far from certain.
After shrinking for nine quarters in a row, Spain's economy grew by 0.1% in the third quarter. The increase was driven by exports, where signs of improvement have been evident for months.
In the first eight months of 2013, exports from the port of Barcelona jumped by 8%. Container traffic to Brazil and Mexico rose by a respective 15% and 13%. Exports are expected to rise by 5% next year.
Spain's firms have become more internationally competitive thanks to Madrid's efforts to clamp down on costs. A "sweeping labour market reform" made it easier to fire people and gave companies more scope for striking wage deals at factory level, said Tobias Buck in the Financial Times.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Since 2008, labour costs have fallen by 5% in Spain, while in Italy and Germany they have climbed by around 10%. Exports in lucrative sectors such as pharmaceuticals and chemicals are rising, as are sales to fast-growing states outside the eurozone.
Nonetheless, exports still only comprise 35% of GDP. To gather speed from here, Spain will have to rely on the domestic economy, and the outlook on that front is less auspicious.
On the plus side, foreign direct investment has picked up, reflecting improved competitiveness. It doubled from last year's low levels in the first eight months of the year.
However, the credit squeeze endures. Bank lending to small and mid-size enterprises has slumped by 66% from pre-crisis peak levels, says Raphael Minder in The New York Times. Banks' capital has been topped up, but they remain exposed to the bombed-out housing market and reluctant to lend.
In the meantime, households and companies are weighed down with debt worth 200% of GDP, while high unemployment of 26% is also a big hurdle to any significant jump in consumption.
Then there's government debt, on course to grow to 100% by the end of next year. "With households, companies and the public sector all deleveraging at the same time, domestic demand is unlikely to return to growth until 2015," says Buck.
Meanwhile, Spain is vulnerable to any fresh panic over other peripheral countries, such as Italy or Greece. Higher bond yields would raise borrowing costs, hampering growth. Span's cyclically adjusted p/e is cheap enough to make it a potential recovery play for the brave. But Spain faces a long, slow slog.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Michelin Key Hotels 2025: the top destinations in the world
The Michelin Keys have been awarded to spectacular hotels across the world. From Marlon Brando's private resort in Polynesia to a Bvlgari hotel in Tokyo, we look at some of the most extraordinary stays in 2025
-
MoneyWeek news quiz: How much could you get in car finance compensation?
The car finance scandal, inheritance tax, and house prices all made headlines over the past few days. Test your knowledge while reviewing this week’s top stories with MoneyWeek’s news quiz