There is hope that Spain’s economy is getting on its feet again
What's going on?
Good news first: Spain continues to add jobs, and unemployment continues to decline. Now here’s the bad news: Despite the improvements, more than 5 million Spaniards remain out of work and the unemployment rate remains above 20% (which is very high).
What does this mean?
The Spanish economy is undoubtedly improving. In fact, most forecasters expect it to grow at least 2.5% this year. Some say that this is due to major labour market reforms that were pushed through in 2012, which made it easier for Spanish companies to hire workers (thus the increase in employment).
Why should I care?
Spain’s economy has been improving, and so have its stock and bond markets. The IBEX, Spain’s main stock market index, is up 12% this year and its government bond prices are at post-crisis highs. Later this year, elections will take place in Spain. A change in government to a party that is less friendly to market reforms (like the aforementioned labour reforms) would likely threaten the recovery in Spanish stocks and bonds. While this is not a near term risk because the election is not until December, investors in Spain should bear the election risk in mind as the year progresses, particularly if employment figures stop improving.
Originally posted as part of the Finimize daily email.
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