Spain’s Economy And ETF Feel The Pains

August 08, 2008 at 1:00 pm by Tom Lydon

There might be rain in Spain, but it could just be tears over how the economy is faltering and, in turn, affecting its exchange traded fund (ETF).

iShares MSCI Spain Index (EWP) may begin to see dreary days, as the country’s finance minister said that the economy could slip to zero growth, reports The Scotsman. New numbers are pointing to 1.6% economic expansion this year and 1% for 2009. Spain’s economy was once the envy of Europe, growing at a 3.8% clip in 2007.

The woes stretch across nearly every sector. Unemployment has increased for the fourth consecutive month. Home sales and mortgage lending was sparse by more than one-third of what the region was experiencing in 2007. Consumer confidence hit a new historic low of 46.3 in July, according to Edward Hugh for Seeking Alpha. The economic downturn in Spain has companies pessimistic about the employment situation, and the number of lay-offs continue to grow.

Spain has collided head-on with the global credit crunch and high energy prices. The hotels and restaurants have been hit hard, as holidays in Europe are either non-existent or cut short. Traditionally, Spain shuts down in August, but one travel agency has been trying to lure travelers with flat-screen T.V. offers for travel packages costing more than $2,320.

Many of the wealthy European travelers have instead hopped on the nearest jet and gone to the United States to take advantage of the weak dollar, reports Angela Doland for Associated Press.