Housing worries despite healthy economic growth
29 September 2005, MADRID — Concerns are increasing about the Spanish 'property bubble' and the country's current account deficit.
29 September 2005
MADRID — Concerns are increasing about the Spanish 'property bubble' and the country's current account deficit.
The Bank of Spain has expressed concern over the growing debt burden of Spanish families and the risk to banks, the Financial Times reports.
Mortgages have overtaken all other forms of lending and are now the banks' biggest asset class.
Another worry about the Spanish economy, analysts say, is the current account deficit.
This stems from soaring oil prices, which doubled in the first half of 2005 to a EUR33 billion record. It now represents 7.5 percent of the country's GDP.
Generally, the economy is healthy, with treasury coffers full and a recent amnesty for foreign immigrants bringing a huge boost to social security contributions.
The economy grew 3.4 percent this year and is expected to continue in the same way in 2006.
With 600,000 more immigrants paying tax, Spain has received 13.2 percent more tax revenues and a 7.7 percent rise in social security payments.
So next year's budget will see a big boost for education and research and development.
Spain is now in its 10th year of uninterrupted economic growth.
Commentators say the reason is good economic management and low interest rates which helped cheap credit and a housing boom.
But long-term, Spain appears to be losing its competitive edge.
'Sand and sea' tourism is under threat from cheaper destinations and companies are seeking cheaper unskilled labour in Eastern Europe and elsewhere.
Subject: Spanish news