Fernando Barciela | The IMF and other international organisations including the OECD are very worried these days that the global economy will only grow 3.3% or less this year. On the other hand, they are very happy about Spain achieving the same level. Why? What makes the diference?
Well it’s basically that 3% growth is bad news for the world economy because it’s much less than normal and indicates a severe slump. Furthermore, the global economy has usually grown at a faster pace than Europe, at least up until now.
In contrast, the 3.3% GDP growth the Spanish government is forecasting for 2015 means Spain will be one of the fastest growing economies in the Europe Union. Once the sick man of the eurozone, Spain has been growing for 11 consecutive months and fuelling euphoria. Prime Minister Mariano Rajoy has labelled the country as the ‘Germany of southern Europe’ and Chris Williamson, chief economist at Markit, said: “It really is Europe’s leading light.”
While the EU economy advanced just 1.5% in the second quarter, Spain registered 3.1% growth. This compares with Germany, only 1.6%, France 1.0% and the United Kingdom 2.6%. The outlook is so good for Spain that after years of dire predictions, international organisations say the country is expected to be the developed world’s biggest job creator this year and next. Its unemployement rate stood at 24.2% in August 2014 and is now running at 22.2%. Of course it is still very high in comparative terms. The average for OECD countries is under 7%.
What is happening in Spain is odd because the recovery in Europe remains very uninspiring. Some quarters back, a genuine revival in the euro area appeared to be under way but that possibility is fading. The European economy’s pace is like a trot compared with America’s 3.7%. It’s bad news that Germany, the region’s powerhouse, lost momentum last month with a slowdown in job creation. The manufacturing sector is set to report a slump in October owing to the Volkswagen scandal, according to analysts. Consequently, everybody expects the ECB to act when its Governing Council meets, announcing more stimulus.
But if Europe is failing to recover, the problem with the emerging markets is they are failing to meet prior expectations. Christine Lagarde, the IMF’s managing director, said its forecasts show global economic activity expanded by less than the 3.4% recorded in 2014, the weakest in six years. In fact Lagarde thinks growth could be below 3% this year.