Who predicted the Spanish economic miracle 2013-17?

When people in the future look back over the "Spanish economic miracle 2013-17" they will ask, how did (nearly) everyone miss the signs? Everyone concentrated on the bad news, of which there certainly was plenty – of high unemployment figures, a depressed internal market and debt ridden local government and savings banks (cajas). Even so, there were one or two articles starting to appear in 2012 (like this one from the Telegraph that at least acknowledges a “austerity miracle” and this one from Bloomberg that talks of a “Spanish revolution” )

But few took into account the changing picture in many areas that would combine to bring the Spanish out of a painful recession and into growth again. The reasons included the following:

  1. The preceding crisis created opportunities. Not just the fact that tech knowledge and low cost start-ups were available to almost everyone, but the crisis had forced many talented Spanish to take advantage of new possibilities, in some cases even leaving the country. In short they started new ventures because they had to. Remember too that at that time Spain topped the European ranking of Smartphone use, with a 63.2% penetration. And by 2012 the ICT industry in the country was estimated to have a value of 85 billion Euros, and growing.

  2. Building on the first point, the Spanish were in an ideal situation to exploit both the English and Spanish-speaking worlds (i.e. a large part of the planet). Although probably unknown to most posters here at that time, there were Spanish start-ups already growing quickly internationally, some examples being Privalia, Boda-click, Akamon, Twissues, SocialBro, MeTheOne, minube, BrainSins, Kantox, Digital Legends, Softonic, Zinkia, Fon and Red Karaoke. There were many, many more to follow.

  3. The recovery of the US market helped the western world come out of recession and regain growth again. * see footnote

  4. Even at the low point of the biggest depression since the 30s, Spain still received large numbers of tourists, estimated at around 55 million. These numbers were destined to grow further as cruise holidays gained in popularity, and the fast train network at last linked up with France and other countries.

  5. Again, even despite the depressed western economy, exporters in Spain managed to grow considerably over the last few years of the recession. Spanish businesses rose to the challenge and found new markets world-wide. At first the sceptics tried to downplay this performance by highlighting the growth was from a low base, but as exports continued to grow, year-on-year, the Spanish trade balance moved from deficit into healthy surplus. In fact, and this would have surprised many critics of Spain at the time, the sales of luxury goods in 2012 actually rose 15% thanks to exports and the vibrant tourist economy:

  6. The 160k residency measure introduced by the government, helped to firm up sales in the property market. However, because of the overhang of unsold properties, we didn’t see a large increase in house prices – which was a good thing and enabled growth in the economy, allowing unemployed building workers to once again find work. The low prices encouraged a new wave of buyers from Scandinavian countries and even Russia.

  7. Companies looked for low-cost countries to carry out business in Europe and consequently they returned to Spain. For example, Ford announced plans to increase production by 80% in Valencia There were also companies who had previously outsourced work to Asia and Latin America, who now returned the jobs to Spain.

  8. Even in 2012 there were signs that other investors and companies were looking to invest again in Spain. Morgan Stanley announced that its “strategy advisers have highlighted Spain as one of the potential surprises in 2013, along other peripheral euro country members.” Spain has been upgraded on economy rankings to the second position–only behind Switzerland–, its best marks since the third quarter of 2009.

  9. Telefonica emerged as a contender to be the next Apple, with their plans to exploit big data and mCommerce channels.

Of course the conclusion above is opinion only, even though the examples cited are genuine, and there are events that may derail this scenario (for example the US economy going into relapse if a tax deal was not reached, or separatists forcing a harmful short-term rupture). There is a lot of pain being felt by many in Spain, and even when the economy grows again there will be a time-lag before all sectors feel the benefit – one reason why prices will remain low for some time to come in Spain. But it is worth noting that two of the world’s richest businessmen, Carlos Slim and Warren Buffett, announced investments in Spain towards the end of 2012. A country with so much talent, resources and connections, cannot stay subdued for long.

Spain – a different point of view, from Grant Thornton

Jeremy Ryan 03/01/2013

This is an interesting article and the only positive thing I've read since the crisis began. (Thank you). Most of the comments you make above relate to large businesses continuing to be successful or small but rapidly growing hi-tech web type business. Whilst this news is great news there is little to cheer for those currently unemployed. The biggest disincentive I see for young people or even experienced unemployed people starting a business is they have to pay 250 euros sociale security to leave their front door before they find a client. Starting a business takes time. The alternative is to stay at home or work in the black economy. Why not give people starting a business a two year break because if they aren't working they aren't paying the social security so what's the difference? The alternative is to wait for these big companies to invest and apply for a job. In all your good news above (and I'm glad to read it) there is only one mention of action by the government and that is to help sell unsold property to people currently residing outside Spain. I actually believe this is a sensible idea that I understand has been tried elsewhere (Portugal/USA) but I haven't read anything about the government (this or the previous one) doing anything to help unemployed Spanish citizens or foreigners who already reside here to make an income. It appears that they are unable or unwilling to try anything innovative and are waiting for other economies to improve which will mean more holiday makers and further business investments in Spain. It doesn't seem very pro-active to me. Cutting spending on education seems like madness to me! If you are right and the economy improves and I hope you are where are the skilled people going to come from? USA, Germany, UK, China, Poland? However, may be I am ill-informed as I am busy trying to juggle my business activities in Spain and explore new opportunities to improve my future. I'm lucky I'm working and have a business but can people wait until 2017?

Chris 30/04/2013

Sure some tech savvy middle class kids will do well once this crisis bottoms out and the rich will always do OK but where will the extra 4 million jobs come from that Spain needs to fix this?

jack 01/05/2013

spains bank lost 260 billion euros tied to housing. telefonica is selling assets and has a 51 billion euro debt

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Very useful update. Thank you.

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