The Spanish economy grew by 0.8% in Q1 2017, an annual rate of more than 3%, higher than recent data for Germany, France and the Netherlands. Unemployment has been trending down and currently stands at a post-crisis low of 18%. Spain suffered more than most during the Eurozone downturn but is now in the economic vanguard.
But political uncertainty is rising: Rajoy’s minority PP Government faces a vote of no confidence on 13th June and the Catalan government is taking active steps towards greater independence. Unstable politics is less of an issue in Spain than in some other countries. The Credit Benchmark Consensus (CBC*) has been trending steadily better with a consensus upgrade looking likely. S&P rate Spain as BBB+ and moved to a positive outlook in March.
Beyond developed economies, Credit Benchmark research shows that Unemployment, GDP per capita, improving external balances and Ease of Doing Business metrics provide a credible proxy for Sovereign Credit Risk for a broad range of otherwise unrated countries. More details in Measurement of Sovereign Credit Quality White Paper.
*CBC = Credit Benchmark Consensus; a 21-category scale which is explicitly linked to probability of default estimates sourced from major banks. A CBC of bbb+ is broadly comparable with BBB+ from S&P and Fitch or Baa1 from Moody’s.
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