The miserable economic news streaming out of Spain shows no sign of abating.
As the French and German economies return to positive growth, official figures published on Thursday show that Spanish GDP contracted a worse-than-expected 1.1 per cent in the second quarter as domestic investment and consumption continued to fall. The press release, in Spanish, is here. A Reuters poll had forecast a 1.0 per cent quarterly contraction.
This represents a 4.2 per cent year-on-year GDP contraction – the worst since 1970.
Also out on Thursday was Moody’s annual sovereign debt report on Spain. And apparently, the ratings agency thinks everything is a-ok (our emphasis):
The effect of the global economic crisis was exacerbated in Spain by a collapse in housing construction, which was one of the country’s main engines of growth. It should eventually recover though is unlikely to regain its former vigour.While its debt metrics have subsequently deteriorated, they should not stretch debt affordability to a level that would undermine the rating.
The country’s ratings have a stable outlook. Moody’s considers Spain’s government to be a “resistant” Aaa entity in the context of the global economic and financial crisis.Elsewhere in Moody’s, however, Lisa Hintz of their Capital Markets Research Group, wrote that:
As Spain continues to weaken, we believe there is a non-trivial possibility of a systemic shock to the Spanish banking market.Hmmm. In the context of the full picture of the Spanish economic situation, we know which analysis we believe.
Related links:
On the matter of Spanish property valuations – FT Alphaville
Spain to tackle deficit by raising tax on rich – FT
Are Spanish banks hiding their losses? – FT Alphaville