Download Spain Business Forecast Report Q2 2011 Brochure

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Spain Business Forecast Report Q2 2011
Description:
The Fallout From Fiscal Austerity
In our Q2 2011 Spain Business Forecast we highlight the downside risks to Spain’s medium-term growth
trajectory as a result of the onset of major fiscal austerity. Ultimately, aside from net exports, we believe
there is little scope for recovery within any component of GDP by expenditure this year. In order to recover
competitiveness lost during the boom years and successfully rebalance the economy away from an over
reliance on domestic demand, asset prices and real wages will need to be brought down further. While the
government has pushed forth with renewed efforts at reforms in recent months, they will take time to take
hold. We hold to our view that Spanish growth will prove anaemic over the long run, averaging 1.6% through
to 2015.
The publisher believes that the Spanish government’s renewed efforts at political and economic reform in
recent months have boosted overall confidence towards the Spanish economy and reassured markets
about the country’s ability to avoid an EU bailout. That said, the current Socialist-led administration will face
an uphill struggle in its attempts to regain the support of the population ahead of elections due in early
2012, especially with labour market conditions unlikely to improve. We continue to see the opposition
Partido Popular forming the next government.
The government has thus far made solid progress in bringing down the fiscal deficit, and we have lowered
our estimate for the 2010 shortfall to 9.5% of GDP from 10.5% previously. However, fiscal consolidation will
prove considerably more difficult in the next two years as the bleak macroeconomic picture fails to improve,
structural reforms prove sluggish and the government is called upon to provide further capital injections
into the banking sector. Our forecasts for 2011 and 2012 remain unchanged for now at 7.0% and 5.5% of
GDP respectively.
Further reform and recapitalisation of the Spanish cajas is necessary to recover investor confidence in the
overall banking sector and for the country to avoid a multilateral bailout. Even with state-sponsored recapitalisation, though, we still foresee a protracted recovery period for the cajas, characterised by continued
deterioration in loan quality, further asset write-downs, and weak profitability. We therefore continue to
distinguish between the larger banks and the cajas, and see superior growth potential for the former given
their diversified international exposure.
Contents:
Executive Summary
The Fallout From Fiscal Austerity
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Solid Reform Progress Won’t Save PSOE
We believe that the Spanish government’s renewed efforts at political and economic reform in recent
months have boosted overall confidence towards the Spanish economy and reassured markets over the
country’s ability to avoid an EU bailout
Table: Political Overview
Long-Term Political Outlook
Political Challenges Beyond The Recession
The recession has put several structural political issues into the spotlight in Spain
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
The Fallout From Fiscal Austerity
We have revised down our forecast for Spanish growth in 2011 to 0.7%, from 0.9% previously, on the back of
the government’s push for major fiscal consolidation this year
Table: ECONOMIC ACTIVITY
Fiscal Policy
Fiscal Austerity: Solid Start But Toughest Years Ahead
The Spanish government has thus far made solid progress in bringing down the fiscal deficit, and we have
lowered our estimate for the 2010 shortfall to 9.5% of GDP from 10.5% previously
Table: FISCAL POLICY
Banking Sector
Recapitalising The Cajas: Time Is Of The Essence
Further reform and recapitalisation of the Spanish cajas is necessary to recover investor confidence in the
overall banking sector and for the country to avoid a multilateral bailout
Regional Banking Sector
Peripheral Restructuring Still Needed
Regional Monetary Policy
ECB: Inflation, Monetary Tightening Back In Focus
This year will be pivotal for eurozone monetary policy, with the European Central Bank (EC B) expected to
steadily withdraw its extraordinary liquidity support measures ahead of rate normalisation
Table: EURO ZONE VAT CHANGES
Chapter 3: 10-Year Forecast
The Spanish Economy To 2020
A Lost Decade Ahead
In order to correct for the massive imbalances built up during Spain’s decade-long economic boom, the
economy is now in the first stages of rebalancing that will result in a lower long-run growth potential
Table: SPAIN Long-Term Macroeconomic Forecasts
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
Table: BMI Business And Operation Risk Ratings
Infrastructure
Table: BMI Legal Framework Rating
Table: Labour Force Quality
Market Orientation
Table: Trade And Investment Ratings
Operational Risk
TABLE: TOP EXPORT DESTINATIONS
Chapter 5: Key Sectors
Pharmaceuticals
Table: Generic Drug Sales Indicators 2006-2014
Table: OTC Medicine Sales Indicators 2006-2014
Table: Medical Device Sales Indicators 2006-2014
Table: Prescription Drug Sales Indicators 2006-2014
Table: Patented Drug Sales Indicators 2006-2014
Chapter 6: BMI Global Assumptions
Global Outlook
Growth Solidifies, But Inflation Poses A Threat
Table: Global Assumptions
TABLE: GLOBAL & RE GIONA L REA L GDP GRO WTH % CHG Y-O-Y
TABLE: CONSENSUS FORECASTS
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