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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