Housing boom threatens to cool Spanish economy

17th March 2005, Comments 0 comments

17 March 2005, MADRID-Despite a decade of strong performance and rising living standards, further economic reform is needed and a housing boom poses risks, an OECD report warned.

17 March 2005

MADRID-Despite a decade of strong performance and rising living standards, further economic reform is needed and a housing boom poses risks, an OECD report warned.

The Organisation for Economic Cooperation and Development said the Spanish economy is heading for growth of 2.7 percent this year and 3.0 percent in 2006, the OECD said.

The Spanish authorities should address high inflation and the housing market and also improve productivity and levels of education.

The economy should show growth of 2.75-3.0 percent on average this year and next, exceeding the eurozone average, the OECD's latest economic survey said.

It put specific growth in 2005 at 2.7 percent and in 2006 at 3 percent.

Spaniards had lower income than the average in the eurozone but the difference has been narrowed substantially at a rate of about one percent per year and should continue to fall.

However despite a rise in living standards, the gap between income per person in Spain and in the eurozone was 13 percent in 2003.

Competitivity was being damaged by inflation and an education level that was below the OECD average.

Official Spanish data put inflation in February on a 12-month basis at 3.3 percent.

The OECD said that on a price deflator basis, Spanish inflation was 4.4 percent in 2004.

It added that the government must find a way to cool the Spanish housing market, as "house prices have almost doubled since 1998, increasing the risk of a fall in the medium term," while domestic borrowing increased sharply.

Unemployment was another area of concern, even though strong job creation had reduced the unemployment rate to less than 10.5 percent.

[Copyright EFE with Expatica]

Subject: Spanish news

0 Comments To This Article