Top Stories World 

Spain facing economic crisis, Wall Street warns as US stock market spooked

Goldman Sachs said “the political events related to Catalonia continue to be an important risk” for Spain’s recovery in a report analysing the Spanish banking system.

The report said: “We continue to see the political events related to Catalonia as an important risk for the recovery of Spain.”

Despite the worrying claims, the bank believes the overall “threat” for the economy in the short term has been reduced.

The capital cost projections for the whole of Spanish banking are currently above their levels prior to the ‘illegal’ referendum held on October 1.

Last month Spain’s credit rating was bumped back up to A by Fitch, the first time it has had an A rating since the eurozone debt crisis.

Last week Prime Minister Mariano Rajoy upped Spain’s growth forecast for 2018 to “at least 2.5 percent” just months after it was downgraded over the secession crisis in Catalonia.

Speaking at conference in Madrid, he said: ”This year, 2018, we will have a growth forecast of at least 2.5 percent, with the creation of 400,000 jobs.”

In October, at the height of an attempt by Catalan leaders to get independence from Spain that caused huge economic uncertainty, the Spanish government downgraded its 2018 growth forecast to 2.3 per cent.

But last month official data showed the Spanish economy had grown more than three per cent in 2017 in a record year for tourism and booming exports, containing the impact of the Catalan crisis.

Spain suffered an almost five year recession until the second half of 2013 when the economy began a long, slow turn around boosted by strong exports and rising domestic demand.

Economy Minister Luis de Guindos said the economy could also grow by around 3 percent this year, after flash data showed 3.1 percent expansion in 2017 year on year.

On Tuesday Irish airline Ryanair said that it has dropped its prices by 30% on flights to Catalonia over the last few months in response to the ongoing political crisis between the Catalan and Spanish governments.

According to the airline boss, Michael O’Leary, the reason was to maintain the level of passenger traffic.

In the final quarter of 2017, passenger numbers had been decreasing. Mr O’Leary also stated that Ryanair will continue to lower prices until there is a rise in the number of tickets bought.

The report from Goldman Sachs comes as the US stock market recovered from a shock week that saw $4trillion wiped off global stocks.

What began as an initial drop on Friday February 2quickly snowballed into a worldwide selloff and wiped $4trillion off the value of stock markets across the globe.

Traders watched on helplessly as the US Dow Jones tanked a massive 1,175 points on Monday February 4 – after falling more than 1,500 at one point.

(Additional reporting by Maria Ortega.)

Related posts

Leave a Comment