Catastrophic 2012 for the Spanish economy

Luis de Guindos.

Source: http://www.periodistadigital.com

A 23.4% unemployment and a fall of 1.5% of GDP

Private consumption will fall just over 1%

The issuing bank has brought forward the presentation of their projections for the recent change of government and changing the timing of presentation of Budget 2012, but warns that the figures are subject to a degree of uncertainty "very high" for exceptional conditions the year, the fiscal assumptions adopted and the complex situation in the euro area and financial markets.
The Bank of Spain are that GDP went negative for the first time in seven quarters in the fourth quarter of 2011 (-0.3%), path "could go this year." This would mean that the Spanish economy would enter technical recession in the first quarter of 2012 (two consecutive quarters of negative growth).
Stresses that during 2011, the "modest" recovery in the Spanish economy had begun a year before gradually weakened, as the sovereign debt crisis in the euro zone was extended to a larger number of countries and recrudecían tensions in financial markets.
This led to the Spanish economy in the third quarter fell 0.3% quarter on quarter, but in annual terms, GDP continued to increase by 0.3% in the quarter and 0.7% in the full year 2011, after two separate setbacks in the previous two years.
In this context, means the monetary authority, employment gave no signs of recovery in 2011, appreciating even intensified in the way of job losses after the summer. Specifically, estimates a fall of 1.7% of job creation last year that, if confirmed, would imply a lower employment level in just over 10% of the existing at the start of the crisis. The unemployment rate had risen to reach 21.5% in the third quarter, a figure that probably will have been exceeded in the last months of the year.
With this profile, the macroeconomic projections encompass a "substantial drop" of GDP in 2012 (-1.5%) and a "modest" recovery in 2013 (0.2%), with positive rates from the first quarter of next year, so goes the economy closer to its growth potential.
HEAVY FALL OF GDP IN 2012 In 2012, falls in activity will be "relatively strong" until the end of summer, fading in the final stretch of the year. In 2013, GDP growth will be mainly to lower requirements of fiscal adjustment and improvement of all components of growth.
The global scenario posed by the Bank of Spain is the result of a "significant contraction" in domestic demand, partially offset by a "large contribution" of net exports. The decline in domestic demand will result from the confluence of a "sharp drop" in public and private components, in a context in which household spending will be restricted by the impact of fiscal consolidation and lower employment.
In fact, the supervisor expected a decline of household consumption over the entire projection period, although the savings rate will remain on a downward trajectory. Residential investment, meanwhile, will continue to record declines in 2012 and 2013, but will be more modest than in previous years having passed the hardest phase of adjustment.
EVOLUTION 2012 When analyzing only the year 2012, the Bank of Spain expects a contraction of domestic demand of 4% for conduct "worst" of almost every game, but especially public consumption and public investment. Private consumption, meanwhile, will fall just over 1% despite the savings rate would show a further decline by the fall in employment and higher income tax.
Investment in housing would be the only component whose rate of change in 2012 could not be lower than in 2011, but will remain negative, falling by over 4%. However, weak demand, the deteriorating outlook and the "tough financing conditions" will affect the implementation of new projects by companies, so that investment will fall about 3%.
Externally, exports will grow by 3.5% while imports will fall with great intensity (-5%), which will cause net exports contribution to growth 2.5 points, half a point above the figure , 2011.

In 2013, private consumption will stop falling, the adjustment in residential investment will be over, business spending will tend to stabilize the income of families present its first rise since 2009, the savings rate would recover "slightly" and exports would expand more vigorously.
On the other hand, the Bank of Spain said that the decline of GDP in 2012 will have a "significant impact" on the job, without incorporating additional measures in the labor market will fall by 3%. Attenuate this pattern in 2013, since in the second half of the year would create jobs in net terms, but will continue to fall year on average (-0.7%).

Escalara UNEMPLOYMENT AT 23.4% Despite the decline in the labor force is projected, these employment figures would result in an increase in the unemployment rate nearly two points in 2012, up 23.4%, a level from which descend only in a "very marginal "in 2013, without additional measures. "Actions more determined in the field of structural reforms would allow a more rapid reduction in unemployment," he says.
On the other hand, inflationary pressures, under the assumption that oil prices behave in the future as seen from their current prices, will decline in the first half of 2012. This situation, coupled with the decline in unit labor costs in the next two years, will lead to price increases "modest" 1.5% in 2012 and 1.2% in 2013.
Nevertheless, the Bank of Spain believes that further adjustment of the economy in 2012 and 2013 allow the correction of imbalances that would be "strangled" growth prospects over the medium term, as firms and households deleveraging and borrowing of the nation.

A big hug,

Adriana Gurgel
Professor and International Consultant
http://adrianagurgel.blogspot.com.es
selectirrhh@yahoo.es