With the exception of a slightly better job situation, the Spanish economy will worsen all around in 2013. The deficit could finish the year at 6% of GDP, which is better than the government's prediction of 6.3% and the EU's final requirement for the year, 6.5%. GDP fell 1.4%, but it is possible that it will level off by the last quarter and could even grow slightly. This would put us in a good position to get out of the recession in 2014.
But according to Ecómetro KPMP-elEconomista, a collection of international groups and analysis shops that creates forecasts for business activity, jobs, the deficit and inflation, the situation is still fragile becuase any small blow from within the country our outside of it could jeopordize Spain's growth potential.
Our analysts think that the risk premium calming down and the EU giving Spain a longer time to meet its deficit goal will allow the government to do its most important work: finish carrying out pending reforms. It is important to enact a serious reform agenda that not only meets the EU's requirements but also puts Spain in a place that allows it to get out of the crisis by changing its economic and production models.
Slight signs of improvement should encourage Rajoy to step on the gas and speed up the reform process. Our in-house analysts believe that if the data remain level, then Spain could really finish the year with a 6% debt/GDP ratio. The sooner reforms arrive, the faster we can see such a result and get out of this crisis.
