SPAIN

Spain



Spain

The Economy of Spain is the eighth-largest economy in the world, based on nominal GDP comparisons, and the fifth-largest in Europe . It is regarded as the country with the highest quality of life in Europe according to numerous studies , has a very high standard of living, and is the world's 15th most developed country, surpassing other comparable developed countries such as the UK, Germany, and Italy .

Until 2008 the economy of Spain had been regarded as one of the most dynamic within the EU, attracting significant amounts of foreign investment. Spain's economy had been credited with having avoided the virtual zero growth rate of some of its largest partners in the EU. In fact, the country's economy had created more than half of all the new jobs in the European Union over the five years ending 2005, a process that is rapidly being reversed.

More recently, the Spanish economy had benefited greatly from the global real estate boom, with construction representing an astonishing 16% of GDP and 12% of employment in its final year. According to calculations by the German newspaper Die Welt, Spain had been on course to overtake countries like Germany in per capita income by 2011. However, the downside of the now defunct real estate boom was a corresponding rise in the levels of personal debt; as prospective homeowners had struggled to meet asking prices, the average level of household debt tripled in less than a decade. This placed especially great pressure upon lower to middle income groups; by 2005 the median ratio of indebtedness to income had grown to 125%, due primarily to expensive boom time mortgages that now often exceed the value of the property.. A European Commission forecast had predicted Spain would enter a recession by the end of 2008. According to Spain's Finance Minister, “Spain faces its deepest recession in half a century”. Spain's government forecast the unemployment rate would rise to 16% in 2009. The ESADE business school predicted 20%. After a steep plunge in late 2008 and throughout 2009, in which the unemployment rate met ESADE's forecast, the economy stabilised in the first quarter of 2010.

The Spanish economy was credited for having avoided the virtual zero growth rate of some of its largest partners in the EU (namely France, German and Italy) in the late 90's and at the beginning of the 21st century in a process which started with former Prime Minister Aznar's recommenced liberalization and deregulation reforms aimed at reducing the state's role in the economy. In 1995, the country began an impressive economic cycle marked by strong economic growth, with figures at or above 3%. In 2008, however, the bursting of the housing bubble resulted in a severe recession that greatly outstripped successive government predictions.

Map showing regional variation in European GDP (PPP) per capita in 2006. Figures from International Monetary Fund

Growth in the decade prior to 2008 steadily diminished the per capita economic gap between Spain and the largest economies in the ...