Spain closes 2016 with better-than-expected economic data

Spanish government has forecast a better-than-expected economic performance of the country with growth for 2016 likely at 3.2 percent, but experts here said challenges remain for the coming year.

Forecasts are positive and the year of 2016 could be considered an optimistic year for the Spanish economy, according to the government forecasts.

The year began with a political uncertainty with a failure in forming a government after elections produced a divided parliament.

Worries about a dented economy were inevitable amid the 10-month political uncertainty and concerns about the lack of government.

However, the influence was less than expected with interest rates on bonds and treasury bills on auctions remaining low throughout the year, even negative in some cases.

Despite some fluctuations caused by the unexpected "Brexit" and the election of Donald Trump in the United States, the Spanish stock market has basically remained stable throughout the year.

The index Ibex-35 started in 2016 with 9,313 points and stood at 9,344 points on Thursday.

And the risk premium even declined some points to 118 on Thursday compared with 121 points when it started this year.

Though the impact from the political uncertainties home and abroad was not as strong as it was expected, some experts worried that political and economic evolutions within European area may influence Spainish economy in 2017.

Spain's obligation to cut deficit is among them, experts say.

Spain is facing a key year for reducing the deficit after the European Union did not fine the country after it missed the 4.2 percent of GDP deficit target in 2015

At home, the high unemployment will continue to be a major challenge for Spain in the coming 2017 despite some improvements, experts say.

According to the Inquest into the Active Population (EPA), in the third quarter of the year, 4.3 million Spaniards were unemployed, which means an unemployment rate of 18.91 percent, first time below 20 percent in six years.

However, Spain's labor market is still plagued by multiple problems of low wages, temporary jobs and labor force decreases besides unemployment, according to the experts.

They said despite the announced increase in the minimum wage to 707.6 euros, a large part of the Spanish population will still face difficulties in affording their daily expenses, as the economic recovery has not reached the entire population.

Some measures, such as tax hikes, have been announced by the government, but these tools should be cautiously implemented, as consumption remains key to recovery, and a VAT hike (as recommended by the IMF) could undermine the growth and suffocate certain sectors of the population, according to the opinion of some experts. Enditem