Sustained growth puts Spanish unemployment at 30-year low

July 30, 2007 - 0:0

MADRID (AFP) -- Spain’s economy is pursuing a decade-long economic expansion, fueled by healthy domestic consumption and rising capital investment, which has helped bring unemployment to a near 30-year low.

The government on Friday raised its forecast for economic growth this year to 3.8 percent from 3.4 percent but kept its 2008 projection unchanged at 3.3 percent. The upward revision for 2007 is due to a more moderate slowdown in domestic consumption and the construction sector than previously expected, while stronger global growth prospects were boosting exports, the economy ministry said in a statement. With economic activity flourishing, Spain created a net 300,000 jobs in the second quarter, taking unemployment to 7.95 percent of the workforce, a level last seen in the fourth quarter of 1978, the national statistics institute INE said. The jobless rate was just slightly above the European Union average. Prime Minister Jose Luis Rodriguez Zapatero, who faces a general election next year, said it was the lowest level of unemployment since Spain returned to democracy after the death of right-wing dictator Francisco Franco in 1975. “This is a great country which has enjoyed a great economic evolution and when it comes to employment we can feel very proud as a society,” he told a news conference after the unemployment figures were released. The Spanish unemployment rate almost hit 25 percent in 1994, one of the highest rates in the region during a Europe-wide recession. But since then an influx of EU development funds combined with a wave of deregulations and privatizations have fueled economic growth that has gradually brought down the number of those out of work. Over two million jobs alone have been created since Zapatero’s Socialist government came to power in March 2004 -- or about 40 percent of the EU average. A huge influx of immigrants, mainly from Latin America, has kept a lid on wage inflation. A recent slowdown in the rise in property prices has raised fears of a crash in the real estate and construction industries, both key drivers of growth. But the government said the cooling building sector was being offset by stronger exports. In May the International Monetary Fund said the Spanish economy was now better balanced with a moderation of consumption and property investment, and an acceleration of exports and non-property investment. It is a view that is echoed by the government. The Washington-based IMF forecast that Spain’s economy would slow down gradually in the medium term after a long period of expansion. Last month Spain’s central bank governor Miguel Angel Fernandez Ordonez warned that the government had to take greater advantage of high growth and should boost savings that could support the economy if it slowed abruptly. “Given the strong position of the economic cycle, income should be strong and should go towards improving the current fiscal surplus. This strategy should be accompanied by efforts to control costs,” he told legislators. The government is aiming for a fiscal surplus of 1.0 percent of gross domestic product (GDP) this year compared with 1.8 percent in 2006. It is planning to raise public spending by 6.7 percent next year. Zapatero has vowed to take steps to make the economy more efficient and productive by cutting red tape and investing in infrastructure and education