Interview: Spanish economy set for growth: senior economist

The Spanish economy is set for continued expansion throughout the coming year, but external factors could also play a role in reducing that growth, a senior economist said on Tuesday.

Rafael Tamames, professor of economics at the Autonomous University of Madrid, said Spain's recovery was reflected in index such as the fall in the risk premium to around 100 points and lower interest rates which had substantially lowered the cost of borrowing on the public debt.

Spain's gross national product grew by an estimated 1.4 to 1.5 percent during the year and has been predicted by the BBVA bank to grow by up to 2.5 percent in 2015.

The 81-year-old professor also pointed to the fall in unemployment during 2014, saying he believes it is partly a consequence of the government's labor reforms which allowed many companies to survive the difficult years of the economic crisis to then be in a position to contract new workers when the recovery began.

Spain ended 2014 with 4,512,116 people out of work, but with an active population of 16,695,752, which is the highest since November 2007.

However, there has been a price to pay for that improvement. The average Spanish salary worth 7 percent less than at the start of the crisis, and new workers earn up to 30 percent less than in 2008. Meanwhile, less than 9 percent of the contracts signed during 2014 were permanent full time contracts.

Those factors have helped to boost Spain's competitiveness abroad, but at the same time it has done little to boost internal demand, which means Spain's recovery will depend largely on the international economy until internal demand picks up.

Tamames highlighted that for the moment, with Spain importing around 70 percent of its energy needs, the continued low price of oil as well as the fall of the euro in relation to the U.S. dollar continue to be important factors to affect the country's economy.

This will help maintain the country's attractiveness as a tourist destination. However, he said the country may find it difficult to repeat what the country did in 2014, in which around 62 million foreign tourists visited Spain.

Popular tourism markets such as Greece, Morocco and Egypt again will become attractive to foreign visitors, while the fall of the ruble will affect the number of Russians visiting Spain, according to the professor.

Tamames believes Spain's food and auto industries will also benefit from low fuel costs and the favorable exchange rates. However, he said the tourist sector and exports in Spain will be affected if France and Italy remain in recession and Germany continues to slow down.

There are also doubts over what will happen with the Japanese economy and even a possible slowdown in Chinese growth, although Tamames believes the continued expansion of Chinese infrastructure towards the western part of the country will maintain growth of around 7 percent this year.

The veteran economist highlighted three factors to maintain healthy growth in the country.

First of all, the challenge is to maintain and increase competitiveness, which should be possible if both fuel and the euro remain cheap.

He said jobs had to be created at a faster rate, which will help boost internal demand, raise tax revenue and cut spending on unemployment payments.

As a long term measure, he believes Spain has to improve its levels of education, which are among the lowest in Europe, in order to have a skilled and educated workforce able to sustain growth in the future. Endit