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Spain Economy Expanding

Spain Economy ExpandingSpain Economy Expanding

Spain, the eurozone’s fourth-largest economy is in good shape, even though recovery from recession is showing some signs of strain and growth is expected to slow next year.

The good news is that Spanish economy grew 0.8% in the second quarter driven by consumer spending and exports. And the country is on track to expand around 3% this year, outpacing the International Monetary Fund’s projections for France, Germany and the US, NewEurope reported.

The bad news is that Spain has been without a full-fledged government since December.

As reported by The Wall Street Journal, doubts about who will form the next one have persisted since the divided parliament elected that month failed to install a prime minister and was dissolved. A new parliament, elected in June, is also deadlocked among four major parties, none close to a majority.

The political stalemate has begun to take a toll on the economy: It chugs along, economists say, but could be growing even faster with a government in place.

Miguel Cardoso, chief Spain economist at lender Banco Bilbao Vizcaya Argentaria SA, said the economy probably would be expanding by 3.5% in 2016 were it not for political uncertainty. Some individuals and businesses are paring back purchases and delaying or cancelling planned investments, he said.

Spanish manufacturers in July reported the first monthly reduction in new orders from clients in nearly three years, according to a survey of purchasing managers at manufacturing companies compiled by data firm IHS Markit.

In a separate report, MarketWatch noted that a global drop in oil prices has left the country’s consumers with some extra cash. Negative interest rates have pushed down the monthly cost of many borrowers’ mortgages in Spain, where the majority of home loans are variable-rate, meaning they fluctuate with changes in benchmark rates.

More good news is that the country’s tourism industry is booming.

Financialtribune.com