Financial turbulence has severely limited the capacity for growth in developed economies worldwide, and what Spain is enduring does not differ greatly from what is occurring in other euro countries. Compared to last year, growth in Spain dropped a tenth of a point in Q1, ending up at 0.2%. Annual growth has dropped that much as well, resulting in 0.7%.
Once again, reduced internal demand has diminished the Spanish GDP, which is relying on foreign demand for its growth. The virulent slackening of purchases from the two biggest buyers of Spanish products, Germany and France, is putting a question mark on the status of their trade deficit, which is further hurting any chance that Spain will meet its annual growth prediction of 1.3%.
In fact, with two quarters already past, the Spanish economy could end up with a 0.8% growth rate compared to last year, just half a point less than predicted and aligning with the worst-case scenario that the Minister of the Economy has outlined in its fiscal year analysis included in the Stability Program.
The slight contraction in Q2 means that earnings expectations for the fiscal year could be compromised, considering that the earnings are inseparably joined to economic activity. For this reason, Zapatero?s government has been asked to instrument a measure that would anticipate the tax liquidations for public limited companies to get some liquidity during the last few months of the fiscal year.
