Country Report Spain January 2009

Outlook for 2009-10

• The governing Spanish Socialist Workers' Party (PSOE) will continue to experience difficulties in passing legislation and could be politically hobbled for a short time at a crucial economic juncture.
• The flagging economy has not brought closer co-operation between the minority PSOE government and the regional parties from which it had expected to garner support, and this is unlikely to change.
• The government will find it hard to recapture the same level of public support as it did in the general election, as it struggles to cope with a severe economic downturn that is expected to last at least up to the end of 2009.
• Increased spending and the significant economic downturn will lead to an estimated fiscal deficit of 3.3% of GDP in 2008, and the Economist Intelligence Unit expects this to rise further, to 7.2% in 2009 and 7.9% in 2010.
• GDP growth is expected to contract by 2.4% in 2009 and 0.4% in 2010, down from estimated growth of 1.2% in 2008. Only a modest recovery will begin during 2010, and there is a possibility that this will be delayed.
• Rapidly rising unemployment means that the tensions associated with a large influx of immigrants in recent years (over 4m in the last decade) are likely to intensify.

Monthly review

• Despite the rapid deterioration in the economy, public opinion has not turned demonstrably against the government. Polls show the PSOE holding on to a small, but not insignificant lead over the opposition Popular Party (PP).
• A change to a more hardline leadership at the left-wing coalition, Izquierda Unida (IU), calls into question the stability of the PSOE's parliamentary working majority, which has depended on IU support since 2004.
• In a round of meetings with regional presidents in late December, the prime minister, Jose Luis Rodriguez Zapatero, appeared to win key support for a proposed new regional financing mechanism, but the details remain unclear.
• Seasonally adjusted volume retail sales according to the National Statistics Institute (INE) declined by 7.9% year on year in October and by 8% in November 2008.
• Following a rise of over 150,000 (seasonally adjusted) in October, registered unemployment rose by a further 115,738 in November, to reach 2.96m people (12.8% of the labour force).
• Consumer price inflation has begun to decelerate markedly, slowing to 2.4% in November and an estimated 1.5% in December.

Source: Country Report

This report covers the following industry codes:
SIC Code: 65;60
NAICS Code: 53;52

This report covers the following industry codes:
SIC Code: 65;60
NAICS Code: 53;52