This Week's Focus: Economic Recovery. Podemos?

This Week's Focus: Economic Recovery. Podemos?


In its updated World Economic Outlook (WEO) in July, the International Monetary Fund (IMF) improved its forecast for economic growth in advanced economies and emerging moderates countries.

So global growth will stand at 3.3% (+ 3.8% in 2016), with a + 2.1% (+ 2.4% in 2016) for developed countries and + 4.2% (+ 4.7% in 2016) for developing countries. China moderate its growth to 6.8% this year and 6.3% in 2016, while India will accelerate to + 7.5% both this year and next.

It draws attention to the timely improvement of growth prospects for the Spanish economy, bringing them to levels advocated for months by the Minister of Economy of the Government of Spain. It is this sense, the IMF estimated that Spain will grow this year by 3.1% and in 2016 will 2.5%, an increase of 0.6% and 0.5% respectively from the previous estimate April this year, ie just three months ago. Does it have something to do with the Greek situation and the possibility that we will win the legislative elections to be held this year in Spain?

The improvement in business confidence, observed by the PMI (Purchasing Managers' Index - Purchasing Managers Index, Markit Economics: index allows to anticipate that GDP growth in Spain will approach or exceed the anticipated post This index is a good estimator advanced GDP growth.

In this regard, and given that the PMI is an index of statistical base consistent, ie it is not based on feelings or opinions, but on actual data, home hope the fact that the Spanish GDP growth to near average rates 3% although it is difficult to argue that it will hold for long. In this regard, recall the comments of our WEEKLY FOCUS April 20, 2015, on the IMF report.

Radiography of the situation of GDP by its components is as follows:

A decline in unemployment It is observed although the rate remains among the worst in the Euro area, with over 23% level, consumer confidence improves, the retail sales recorded their first increase in six-month moving average since 2007, the registration of new motor vehicles to grow by almost 20% over the previous year and the consumer price index (CPI) returned to positive rates, removing the risk of deflation.

The improvement in business confidence as measured by the PMI index remains at levels of economic expansion since mid 2013. Industrial production increased by 3% in the last 12 months, accompanied by a slight increase in producer prices impacting positive way in business margins.

However, the construction sector is earthbound, with the construction of new homes at levels close to zero but with a perceived slight improvement in prices. We talk about this sector more widely in other WEEKLY FOCUS shortly.

Foreign Sector
With no ability to increase its contribution to GDP, remains stable with a contribution of 2% of total GDP. However, some deterioration of the current account balance due to increased imports is seen, on the other hand, caused by improvement in domestic consumption.

Public spending
With debt at 98% of GDP and a deficit of -5.8% of GDP in 2014 and an estimated 3.3% for 2016, the capacity of public spending is weak and its contribution to the improvement of GDP and growth will have a marginal effect even in an election year.

Contrary to the desire for greater flow of credit, the data shows a decrease, following the trend of deleveraging of households and firms that began with the financial crisis. So, credit to the private sector declined -8.2% in 2013, continued in 2014 and down -4.9% in the first quarter of 2015 fell by -5.0% over the same period of 2014. The delinquency remains high, at 12%, and although not worse, not allowed to submit an encouraging framework for improved consumption and investment in the short term.

In conclusion, it seems that the Greek debacle after the victory of Syriza, the EU does not want to think of another country of the Union to consider the reversal of the austerity measures imposed by the bailout programs. Therefore, in an election year and before the advance of Podemos in Spain in recent local elections, it seems that the best way to keep the situation under control is improved growth forecast.