Spanish Bulls See Economy's Best Year Since 2007By
BBVA, Bankia economists predict Spain will grow 3.3% in 2017
IMF joins bullish call revising growth for this year and 2018
Spanish bulls are betting the economy will beat expectations again.
The consensus at the start of 2017 was for the economy to lose steam this year as tailwinds faded and past reforms wore off. Now its renewed momentum -- which has allowed the government to raise its forecast twice already -- has some economists predicting the best year since the recovery started in 2014.
After growth of 3.2 percent last year, faster than its main euro-area peers, surveys and labor data point to continued strength in the economy. Banco Bilbao Vizcaya Argentaria SA and Bankia SA say it will top last year’s reading and grow 3.3 percent in 2017.
If they’re proved correct, that would be the fastest growth since 2007, before the housing market crashed and Spain tipped into recession. The economy probably grew 0.9 percent in the second quarter, the fastest in almost two years, according to a survey before data due on Friday.
BBVA anticipates a 1 percent pace, citing household consumption, exports and a pickup in services helped by a tourism sector that’s on track for record visits.
“The consensus view was for a slowdown but that hasn’t materialized -- the economy remains very dynamic,” said Miguel Cardoso, chief Spain economist at BBVA in Madrid. “In fact, far from a correction, what we see is a more virtuous composition of growth.”
The positive mood on Spain -- supported by seasonally adjusted retail sales on Wednesday that beat economists’ estimates -- coincides with the five-year anniversary of European Central Bank President Mario Draghi’s “whatever it takes” speech, in which he vowed to deploy all necessary tools to protect the euro zone and shore up confidence in the region. At the time, Spain was the euro’s problem child: it had to bail out its troubled banks, unemployment was rocketing and the government was forced to implement unpopular labor-market reforms.
“Favorable financing conditions and low interest rates have helped maintain the economic momentum in Spain,” said Jose Ramon Diez, chief economist at Bankia. “Having said that, policy works for all, and Spain is clearly outperforming its euro-area peers -- that has to do with a structural change mainly through a more competitive external sector.”
The International Monetary Fund echoed that positive assessment this month when it upgraded its forecast to 3.1 percent from 2.6 percent, the second positive revision in seven months. The fund cited the impact of reforms, easier access to credit and a more balanced growth model that has a bigger focus on exports and is less reliant on construction.
“The economy carries a lot of momentum and that should place us on a stronger foot going into 2018 where we predict growth of 3 percent,” Diez said. “It’s a bullish call, but we don’t see a point to go below that with the kind of data that we’re getting.”
— With assistance by Macarena Munoz Montijano, and Harumi Ichikura