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Concepts that are applicable to our topics

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Concepts that are applicable to our topics

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- Unemployment rate
- GDP
- Inflation
**Increase in GDP results in decrease in unemployment rate, since more people is employed, they have higher purchasing power which results to higher standards of living causing inflation to happen.**

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Brussels raises Spain’s GDP growth forecast for 2018

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Brussels raises Spain’s GDP growth forecast for 2018

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- The Catalan crisis will cause an impact on the Spanish economy if Catalonia gained its independence. Nonetheless, it has not affected the economy of Spain as of now as its GDP growth forecast for Spain has increased from 2.5% to 2.6%.

- Spain will definitely get the impact after the independence of Catalonia as Catalonia is shown to contribute to 19% of Spain's GDP and thus, Real GDP will drop after the split, which may significantly lead to recession.

- It is predicted that the economic growth of Spain will increase from 2.3% to 2.5% resulting in an increase of its GDP. However, there is still a significant large percentage of the Spain's labour force that are unemployed. Thus, deflation is expected to occur in the near future.
- Economic situation in Spain is slowly getting better and Spain is getting out of recession.
- However, the inflation rate is predicted to fall in year 2018 and year 2019. Reason being that even though the economic situation is improving, but levels of debt and unemployment are still high.
- There is still cyclical unemployment even though the economic situation is slowly getting better
-It was mentioned in the article that the International Monetary Fund (IMF) has reviewed its October forecast for Spain down from 2.5% to 2.4%, as a reflection of “political uncertainty”. This factor impacted economic growth significantly through physcial and human capital accumulation as “political uncertainty” may lead to a more frequent switch of policies, creating volatility among its people. Thus, it might create an uncertain political-economic environment, raising risks and reducing investment within the country. Therefore, with all of the uncertainties from the government, investors and producers are afraid to invest in the country which leads to a drop in GDP and a slower economic growth.

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Spain has got a good grade from European Union economic authorities on the same day that it is nominating a candidate to the European Central Bank (see sidebar).

In November, the European Economic Forecast had reported that it was too soon to gauge the effects of the Catalan crisis on the Spanish economy, even though Madrid was already putting the cost at €5 billion.

But the new EU winter forecast, due out later on Wednesday, sees little to no impact from that crisis, and raises its 2018 GDP growth forecast for Spain from 2.5% to 2.6%.

According to the European Commission, the Spanish economy will subsequently slow down its pace, falling to 2.1% in 2019.

Other economic indicators show a trade surplus but very high levels of debt and unemployment, which stands at 17.4% of the labor force. Brussels thinks that this figure will continue to shrink over the next two years, to reach around 14% in 2019.

Inflation was 2% in 2017 and is expected to drop to 1.6% in 2018 and 1.5% in 2019.

Return to growth

Spain's output returned to pre-crisis levels in mid-2017, and is now growing at a much faster pace than the EU average.

With the recession finally overcome, what worried Brussels about Spain was the potential effects of the secessionist challenge in Catalonia, and the political weakness of a minority government unable to get the 2018 budget passed.

The budget is yet to get green-lighted, but experts estimate that Spain will reduce its deficit to well under 3% of GDP this year.

Public debt, on the other hand, is close to 100% of GDP (it stood at €1.14 trillion in November 2017), which puts Spain in a vulnerable position should lean times return.

Other forecasts

Meanwhile, the Spanish government's own 2018 growth forecast is set at 2.3%, a figure that was arrived at in October of last year, around the time of the illegal independence referendum in Catalonia. Last week, Prime Minister Mariano Rajoy announced that the forecast will be raised to "at least 2.5%."

The International Monetary Fund (IMF), for its part, has reviewed its October forecast for Spain down from 2.5% to 2.4%, as a reflection of "political uncertainty."

The Bank of Spain's most recent 2018 forecast came out in December, and likewise set GDP growth at 2.4%.

English version by Susana Urra.

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Brussels raises Spain's GDP growth forecast for 2018

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Spain has got a good grade from European Union economic authorities on the same day that it is nominating a candidate to the European Central Bank (see sidebar). In November, the European Economic Forecast had reported that it was too soon to gauge the effects of the Catalan crisis on the Spanish economy, even though Madrid was already putting the cost at €5 billion.

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- The Catalonia crisis has led to an economic downturn causing businesses to scaled down their operations thus causing the overall GDP of Spain to decrease. Moreover, Catalonia is one of the major contributors to Spain's GDP of 19%.
- Spain have been facing recession for the past five years, but now Spain is slowly going through a recovery.
-The political events related to Catalonia remain as an important threat to Spain’s economy. Spanish government initially forecast the economy growth of at least 2.5% but has since downgraded to 2.3% due to the political events in relation to Catalonia.
-It affects the economy growth and causes decrease in inflation for Spain as lesser people will want to visit Spain resulting in an decrease in tourism.
-For example, Airline have since dropped its prices by 30% on flights to Catalonia due to the political conflict between Catalan and Spanish government, so as to encourage people to take the flights as an effort to maintain the level of passenger traffic.

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Goldman Sachs said "the political events related to Catalonia continue to be an important risk" for Spain's recovery in a report analysing the Spanish banking system.

The report said: "We continue to see the political events related to Catalonia as an important risk for the recovery of Spain."

Despite the worrying claims, the bank believes the overall "threat" for the economy in the short term has been reduced.

The capital cost projections for the whole of Spanish banking are currently above their levels prior to the 'illegal' referendum held on October 1.

Last month Spain's credit rating was bumped back up to A by Fitch, the first time it has had an A rating since the eurozone debt crisis.

Last week Prime Minister Mariano Rajoy upped Spain's growth forecast for 2018 to "at least 2.5 percent" just months after it was downgraded over the secession crisis in Catalonia.

Speaking at conference in Madrid, he said: "This year, 2018, we will have a growth forecast of at least 2.5 percent, with the creation of 400,000 jobs."

In October, at the height of an attempt by Catalan leaders to get independence from Spain that caused huge economic uncertainty, the Spanish government downgraded its 2018 growth forecast to 2.3 per cent.

But last month official data showed the Spanish economy had grown more than three per cent in 2017 in a record year for tourism and booming exports, containing the impact of the Catalan crisis.

Spain suffered an almost five year recession until the second half of 2013 when the economy began a long, slow turn around boosted by strong exports and rising domestic demand.

Economy Minister Luis de Guindos said the economy could also grow by around 3 percent this year, after flash data showed 3.1 percent expansion in 2017 year on year.

On Tuesday Irish airline Ryanair said that it has dropped its prices by 30% on flights to Catalonia over the last few months in response to the ongoing political crisis between the Catalan and Spanish governments.

According to the airline boss, Michael O'Leary, the reason was to maintain the level of passenger traffic.

In the final quarter of 2017, passenger numbers had been decreasing. Mr O'Leary also stated that Ryanair will continue to lower prices until there is a rise in the number of tickets bought.

The report from Goldman Sachs comes as the US stock market recovered from a shock week that saw $4trillion wiped off global stocks.

What began as an initial drop on Friday February 2quickly snowballed into a worldwide selloff and wiped $4trillion off the value of stock markets across the globe.

Traders watched on helplessly as the US Dow Jones tanked a massive 1,175 points on Monday February 4 - after falling more than 1,500 at one point.
(Additional reporting by Maria Ortega.)

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Spain faces economic crisis: Wall Street warns of Spanish TIMEBOMB as US investors spooked

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Goldman Sachs said "the political events related to Catalonia continue to be an important risk" for Spain's recovery in a report analysing the Spanish banking system. The report said: "We continue to see the political events related to Catalonia as an important risk for the recovery of Spain."

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Spain's new government agrees to raise pensions in line with inflation.(updated, new article)

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Spain's new government agrees to raise pensions in line with inflation.(updated, new article)

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- The Spain's government decided to raise the pension for the retirees due to the inflation.
-  Spain decided to cut on spending so that the aggregate expenditure of the nation will decrease to prevent further inflation of prices of goods and services.
-Spanish consumer prices rose in June at their fastest rate since 2017 due to the rise in cost of fuel prices. This is known as the cost-push inflation. The general price level in economy will then be "pushed up" by the pressure on the cost of production.
- The rise in retirement pension will allow the retirees to have greater purchasing power.
- When there is unanticipated inflation, the fixed income earners cannot protect their purchasing power. And with the retirees who got their pension cannot protect their purchasing power as it is eroded by inflation.

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MADRID (Reuters) - Spain's government has reached a preliminary deal to raise retirement pensions in line with inflation, suggesting its new Socialist leaders may take a less restrictive approach to spending after years of austerity under their predecessors.

The multi-party commission that controls social spending had agreed to the raise, though full details were still to be decided, the Socialist party said in a tweet late on Tuesday.

"Now the right must allow that all pensions rise with inflation, also in times of crisis," it said.

Since 2014, retirement pensions have risen by a below-inflation 0.25 percent per year.

Consumer prices rose 2.1 percent year-on-year in May according to data from the National Statistics Institute on Wednesday, the sharpest increase since April 2017.

Spain's conservative People's Party (PP), forced out after six years in government in a no-confidence vote that followed a slew of corruption cases involving PP members, kept a tight rein on spending to cut one of the euro zone's highest public deficits.

The welfare system's backup fund was decimated by around five years of recession following a burst real estate bubble in 2008, while an aging population means funds are still being drained from public coffers faster than they can be replenished.

Spain has around 8.7 million retirees claiming a pension and a falling birth rate has prompted concerns of a potential pensions time bomb and calls for a deeper reform of the system than that passed in 2013.

Spain cut its public deficit to just over 3 percent of economic output last year, in line with European Commission targets, from almost 11 percent in 2012 through unpopular spending cuts and tax hikes.

Proponents of pension hikes argue that strong growth since the slump ended in 2013 has helped ease budget pressures.

Agreed raises during times of economic downturns were still being debated as part of the agreement, Labour Minister Magdalena Valerio said on Wednesday.

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Spain's new government agrees to raise pensions in line with inflation

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MADRID (Reuters) - Spain's government has reached a preliminary deal to raise retirement pensions in line with inflation, suggesting its new Socialist leaders may take a less restrictive approach to spending after years of austerity under their predecessors.

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Spanish unemployment falls to pre-crisis levels

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Spanish unemployment falls to pre-crisis levels

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- Due to recession, Spaniards have lost their jobs and hence is relying on the government unemployment benefits. Also, there is an increase in the Spaniards requesting additional state help whom those are already claiming benefits from 30% in 2009 to 56% in 2017.
- Those who have requested a government subsidy are mainly long-term unemployed citizens who have been exhausting their contributory benefits.
- Applying from what we have learnt, this is a Cyclical Unemployment which is caused by lack of jobs during a recession. Cyclical employment is caused by the lack of job during recession. When real GDP falls, companies slows down and many labor will not be needed thus, unemployment rate rises at times of recession which is a period of general slow down in economic activities
-Generally, Spain unemployment rate have decreased from 22.37% in July 2015 to 16.74% in Jan 2018, this means that Spain is improving on its unemployment rate despite several worrying factors.
-For example, factors like structural unemployment is very common in Spain especially during the real-estate boom. As the demand for buildings and development in tourism is relatively high in 2006, many concluded that education did not pay which results to higher early school-leaving rate as the demand for real estate soar.
-However, many were out of job as the construction sector were destroyed as soon as the economy ground to a halt, leaving many with minimum skills to regain employment.
-In conclusion, unemployment rate decreases as inflation increases

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Flickr
THE number of people seeking work in Spain stood at almost 3.5 million at the end of January, according to government data.
Spending on unemployment reached more than €17 billion in 2017, the lowest amount since 2007.

The amount of those enrolled with the Public Employment Service was at its lowest level since 2009, around the time the last economic crisis began.

The Spanish government spent 44 per cent less on unemployment benefits than it did almost ten years ago, according to the Ministry of Employment.

Differences in spending were reportedly down in part to the number of people eligible to claim unemployment benefits falling. Around 58.6 per cent of those out of work received state subsidies last year compared to 80 per cent in 2009.

The number of those claiming benefits that have had to request additional state help was more than half (56 per cent) in 2017, compared to 30 per cent in 2009.

This was reportedly due to those who have been long-term unemployed exhausting their contributory benefits which means they had to request a government subsidy.

People claiming unemployment benefits spend less time receiving payments on average than they have done in previous years, which is another factor in spending being lower.

Claimants spent an average of 15.1 months receiving state help, compared to 15.8 in 2009 and 17.9 in 2013.

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Spanish unemployment falls to pre-crisis levels

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Flickr THE number of people seeking work in Spain stood at almost 3.5 million at the end of January, according to government data. Spending on unemployment reached more than €17 billion in 2017, the lowest amount since 2007.