Morgan Stanley expected to continue decreasing Spain in 2010 but recover in 2011
| Date: January 6, 2010 | Source: Economic @ 21 |
| Category: Economy | |
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Loading ... Spain recorded a GDP contraction of 0.7% in 2010 and together with Greece and Ireland, will remain at the tail of the economic growth in Europe, says Tuesday the U.S. entity Morgan Stanley, says the country has numerous tasks for restore balance in the future.
"Unlike in other European countries, Spain is in the middle of a structural adjustment, particularly in the construction sector, which will weigh on the economy in 2010 and 2011," predicts the report.
However, the bank asserts that this adjustment is taking place "fairly quickly" and that if productivity continues to accelerate, Spain could become "more competitive" and benefit from the recovery of exports.
The entity identifies five factors by which the country's economic growth will continue to evolve negative in 2010 and upwards, but slowly, in 2011, the first one, "that stabilization of the construction sector is still far" and is unlikely to stabilize soon.
Second, consumer spending levels remain "anemic", but the bank predicts that the Spanish labor market contraction will be harder than in other European countries, but "shorter" as well.
In addition, warning about the high leverage of private sector, which "weighs" about the economy and that will continue "for some time," although the lower mortgage interest rates and corporate could provide "some relief".
IMPROVING THE COMPETITIVENESS
On the other hand, the bank warned that credit availability will remain constrained over the next two years, as banks are reluctant to lend because of uncertainty about potential losses, even though the government ensure that the institutions are well capitalized.
Finally, Morgan Stanley warns that because of the large budget deficit that keeps the Spanish economy, the country can not long maintain fiscal stimulus and remember that tax increases for this year are already on the agenda of the Executive.
But not all bad news for the Spanish economy, says the bank, which emphasizes "rapid pace" with which the adjustment is taking place. "With GDP to shrink less than employment, labor productivity has accelerated," said Morgan, who says that if these benefits are sustained, will reduce unit labor costs, which will encourage competitiveness and exports.
A recovery in exports could help rebalance the economy whose main pillars of growth have been domestic factors during the years of boom, says Morgan Stanley, however, remember that the country will be the last to leave the eurozone recession.
