Spain still has a long way to go before experiencing economic well-being. Will the country-specific exchange traded fund (ETF) come to a slow crawl as poor manufacturing rates and high unemployment plague Spain’s economy?
As many eurozone countries pulled out of the recession in the third quarter, Spain’s economy contracted for the sixth consecutive quarter, as stated in The Economist. With unemployment rates at 19% and a stagnant economy, Spain may take until 2011 for a real recovery, and that is an optimistic projection. (Why Spain’s ETF is up while economic data is down).
Spain’s Socialist Prime Minister, José Luis Rodríguez Zapatero, remains optimistic, though. He insists recovery has started and the country’s potential growth remains above the eurozone average. The government revealed a bold “sustainable economy” plan that will aim at the long-term but observers see that it is short on tougher measures.
Zapatero said the government expects new job creation in late 2010 and early 2011, according to sifynews. The government is trying to foment sustainable and productive sectors while reducing the economy’s reliance on construction. There will be $30 billion set aside to support business projects in competitive sectors and a $7.5 billion fund for municipal governments to improve infrastructure and energy efficiency.
The overall index for Spain’s manufacturing sector dropped to 45.3 in November from 46.3 in October, according to ForexYard. The employment sub-index also fell to 40.5 from 42.9. A level of 50 denotes the difference between a contraction and expansion.
Spain’s fiscal deficit is estimated to reach 10% of GDP this year and the economy is expected to contract by 3.5% this year, followed by a further 0.25% decline in 2010, according to the Organization for Economic Cooperation and Development (OECD).
Its ETF has been faring well year-to-date, thanks to a heavy allocation to Spain’s financial sector. The country recently unveiled a 10-year plan that features, in part, more supervision of the sector in order to make it easier for people to create businesses.
For more information on Spain, visit our Spain category.
- iShares MSCI Spain Index (NYSEArca: EWP): up 40.7% year-to-date
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.