News Analysis: Recent data confirm Spain's economic recovery

Data published in recent days by the Spanish press confirmed the fact that the country is slowly recovering from a deep economic crisis.

Among the most positive data are the reduction in unemployment in 2014 and an increase in consumer confidence, which ended 2014 at similar levels to the start of the crisis.

These two data link a key concept for the recovery of the Spanish economy that the government expects to boost in 2015, domestic demand.

According to the Ministry of Employment, the decline in unemployment in 2014 was the largest annual decline since 1998, leaving a total of 4.4 million people registered in the Spanish job search services.

It should be noted that this unemployment figure does not include certain groups, such as job seekers with limited availability, those attending training courses for more than 20 hours a week or those unemployed who decide to emigrate or not registering as unemployed.

By contrast, the Inquest into the Active Population (EPA) carried out by the Spanish National Institute of Statistics (INE) includes a wide sample of households, about 65,000, which results in a superior number of unemployed people to that provided by the Ministry of Employment.

In the third quarter of 2014, the unemployment rate stood at 23.67 percent, with 5.4 million people unemployed according to the EPA, which will publish 2014 data later in January.

According to Almudena Semur, manager of the Institute of Economic Studies (IEE), "we will see during the year 2015 how employment will grow significantly and it will drop by the end of this year to a rate below 20 percent."

However, Spaniards are not only concerned about the overall figures, but also about the quality. Many complain about the jobs, which are considered precarious, poorly paid and temporary.

According to the Ministry of Employment, indefinite contracts accounted for 8.07 percent of the total in 2014, while temporary contracts represented 91.93 percent.

The professor of economics at IESE Business School, Antonio Argandona, recommended more reforms into the labor market in order to create more job opportunities.

After the labor reform "the result is this job creation that we had never seen within the Spanish economy," he said.

Argandona admitted, however, that current expectations of workers were not very good.

"Will I lose my job in six months? ... Meanwhile, I work, and this contributes to creating this atmosphere of slight economic growth," he said.

If employment grows in 2015, as experts predicted, the Spanish population will have more money in their pockets, helped by a tax reform that lowers the income tax by an average of 12.5 percent.

The decline in prices, especially oil prices, is a trend that continues and also benefits demand.

According to the Oil Bulletin of the European Union, gasoline and diesel prices dropped more than 5 percent during the Christmas period.

But what will the Spanish families do?

Professor Argandona said that Spanish families, who are heavily indebted "save only what they need to pay their debts, no more."

According to the latest data from the INE, in the third quarter of 2014 Spanish households spent less than they earned. Disposable income increased by 0.7 percent and consumer spending rose by 2.6 percent in comparison with the same period last year.

Meanwhile, consumer confidence rose to 90.6 points in December, which still indicates a negative outlook on the economy as it is below 100 points. However, the figure is similar to that of the beginning of the crisis with an increase of seven points from last November.

"The recovery in consumption is small," Argandona said, adding "we need further reform, because demand will not grow much more because we are poorer."

The key role of domestic demand in economic growth was shown by the INE in November 2014, when publishing that the Spanish economy grew by 0.5 percent between July and September 2014 especially thanks to a 2.7 percent rise in household consumption.

The perspectives of experts for this 2015 are generally positive, although with limitations.

Semur predicted a 2.5 percent growth of gross domestic product (GDP) in 2015, as well as Professor Argandona, who sees perfectly possible a GDP growth of 2 or 2.5 percent.

If prices remain low, consumer confidence continues to rise and employment recovers, it seems that the perspectives of experts, which are very similar to those of the government, can be achieved. Endit