How to Get the Spanish Economy into Fighting Shape

12 Sep 2019

Economist Antonio Argandoña cautions that “not too bad” isn’t the same as “good,” in terms of the Spanish economic situation.

STI Experts

The Spanish newspaper El Periodico de Catalunya published on September 11 an opinion piece by Antonio Argandoña titled “The Health of Our Economy” in which the IESE economics professor cautioned against complacency in the current economic atmosphere.

He described a situation in which things are going fairly well, but weakening, and not up to any big challenges. He began by noting that the Spanish economy is stronger today than it was when heading into recession in 1992 with a highly negative trade balance. Yet today there are reasons to worry, which, though they might not be serious individually, could potentially add up to something worrisome. GNP and job creation are up recently but still in a decreasing trend, he noted, and investments have grown, but less than taxes. And the industrial landscape is less than ideal.

He pointed out that the greatest challenges are coming from outside the country, naming Germany and Italy and the UK with its mercurial Brexit scenario. So while it might seem natural to look to these same outside influences for the solutions, he said, that would be an error. He recommended that Spain clean its own house first. He cautioned against stimulating private consumption at the cost of increasing household debt burden. The private sector, he claimed, is in good enough shape to keep moving forward slowly, but can’t handle anything too demanding. Neither can Herculean measures be expected from the government with respect to the economy. Not least because it is not even clear who will govern, much less how. 

So we shouldn’t rest easily that things aren’t going too badly, he said, because there is much to be done. The important real estate sector is still not back to full strength, for one, and the job market requires the kind of deep reform that no one seems even to be contemplating, according to Argandoña. Furthermore, the inexorable progress of technology will require universities and technical academies to innovate as well. It’s a good time to examine the foundations on which Spanish productive structures rest, he encouraged.