Short run growth (post financial crisis): Spain has been experiencing very rough after-shocks since the

global economic crisis of 2008. There are serious concerns about Spains economic growth in the short run, due to rapidly deteriorating economic indices like GDP growth, unemployment, industrial production, high current account deficit and government debt etc. More recently there has been increasing concern about Spains excessive levels of debt (currently equalling to 60 % of GDP). The GDP growth has been consistently very low since 2008, with 2009 actually witnessing negative growth (recession) with -1.6 % growth in 1st quarter of 2009. Long run growth (1995-2011): Spain has witnessed a steady GDP and industrial production growth rate of around 1-1.5 % in this period. The Spanish economy had benefited greatly from the global real estate boom, with construction representing around 16% of GDP and 12% of employment in the most recent years. Unemployment rates have come down from more than 20 % to moderately low levels of 8 %. In fact, the country's economy had created more than half of all the new jobs in the European Union over the five years ending 2005. The inflation rates shot up in this period, rising to all time high rates of 5% just before the economic crisis. The financial crisis saw the rates plunge with deflation actually occurring. Very Long run Growth (1961-2011): The GDP growth was sluggish form 1960-1980 and it was lower than most other European economies. Since then there has been a marked increase in total GDP due to high domestic growth, foreign trade, urbanisation and demographic transition. Macro-economic variables: Inflation: The inflation rate of Spain is around 3.2% (June 2011). The rate has been falling for the fourth month running. The decline in this inflation can be attributed to decrease in the prices of fuel and food and beverages. This inflation was still higher than average Eurozone inflation of about 2.5%. Unemployment Rate: The unemployment rate in Spain is around 20.9% in Q2 and this has been a rising trend as compared to previous years. Youth population contributes about 45% of the unemployed population. The Spanish government has approved labour reforms recently to encourage firms to hire new workers especially the young. GDP (Output)/Output Gap : The GDP in Spain has expanded by 0.2% in the Q2 of 2011. Spains GDP worth 1407 billion USD contributes to 2.27% of the world economy. The output gap of Spain has been -3.294% in the year 2010. It is expected to decrease to -2.84% in 2011. Driving forces : Tourism: During the last four decades Spain's foreign tourist industry has grown into the second biggest in the world and was worth approximately 40 billion Euros, about 5% of GDP, in 2010. The total value of foreign and domestic tourism came to nearly 11% of the country's GDP and provided employment for about 2 million people. Automobile industry: The automobile industry in Spain is a large employer in the country, employing 9% of the total workforce in 2010 and contributing to 3.3% of the Spanish GDP, despite the decline due to the economic recession of the past couple of years. In 2010, Spain was in the top ten of the largest automobile producer countries in the world. Real estate: It was one of the major drivers of economic growth till the financial crisis of 2008, which witnessed the housing sector bust and contributed to much of Spains current economic woes. Inferences: Spain is facing problems like high unemployment and very low rates of GDP and industrial production growth. Its high rates of sovereign debt and lack of investor confidence is making it difficult to get fresh foreign investment. It has been clubbed with other weak European economies and clubbed as one of PIGS countries. As of now there is no immediate threat of Spains sovereign debt yet. The fiscal deficit is projected to decline from 6.3% in 2011 to 4.4%in 2012, mostly reflecting measures to lower spending. The sluggish growth scenario is expected to continue in near future.