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Spain: Behind the glitz and glamor lies a sad tale of economic woe
If you spent this past weekend glued to the TV, you would be forgiven for thinking that Spain is a country with no worries and awash with cash. As Spanish trio Jorge Lorenzo, Marc Marquez, and Dani Pedrosa were racing round Silverstone on motorbikes that cost around €5m ($6.4m), Real Madrid were proudly announcing the €100m ($128.5m) purchase of the world’s most expensive footballer, Gareth Bale, taking their summer spending to an estimated €163.5m ($210.1m). However, behind the glitz and glamor of elite level sport lies a sad tale of worryingly high unemployment and declining GDP.
Among the continent’s larger nations, Spain has very much become the sick man of Europe. Unemployment in the country currently sits at around 26% (approximately six million people) and the International Monetary Fund (IMF) has predicted, rather alarmingly, that this will remain the case until at least 2018. In Q2 2013, Spain’s GDP fell by 0.1%, meaning that the economy has contracted in every quarter since Q2 2011.
The 0.1% contraction in GDP was in line with forecasts and if this continues, GDP is expected to decline by 1.3% during 2013 as a whole. Although GDP is forecast to grow over the coming years, it is expected to have little-to-no impact on unemployment as growth will be too weak. In its report, the IMF notes that “Spain has historically never generated net employment when the economy grew less than 1.5% to 2%.” This is particularly concerning if you are a Spaniard aged under 25.
Under-25s have borne the brunt of Spain’s economic meltdown, sparking talk of a ‘lost generation.’ Between June and August of this year, youth unemployment grew by 2% taking the total number of under 25s seeking work to over 880,000, despite Mariano Rajoy’s government claiming the worst is over. Only Greece has a higher rate (62.9%) and even there you’re better off being a young man than you are in Spain in terms of employment prospects.
Spain has received €41bn ($52.7bn) from a Eurozone bailout fund to help shore up its ailing banking sector and there is already some cautious optimism that this may have helped the banks navigate their way through the choppiest waters. Unemployment rates and declining GDP however, do little to inspire confidence and it seems as though Spain may have to endure economic woe for some time yet.
For a detailed PESTLE analysis of Spain see MarketLine’s Spain Country Analysis Report.