Spain Outruns EU Average In Growth League.

18 February 2002

By Robert S Duncan

Of DOW JONES NEWSWIRES

Spain continues to outstrip the European Union average for economic growth despite the downturn after Sept. 11, data Wednesday are expected to show.

The nation's gross domestic product grew an annual 2.2% in the fourth quarter and by 2.7% for the whole of 2001, according to a survey of five economists.

If accurate, that's a sharp fall-off from 2000, when growth was 4.1%. However, it's thought strong growth in tourism, which represents around 12.1% of Spanish GDP, cushioned the blow, helped by only a modest drop in private consumption and a healthy construction sector.

By comparison, E.U. GDP growth is seen around 1.7% in 2001, 1.5% in 2002 and 2.5% in 2003.

The data release is expected by 0900 GMT - no specific time is given.

For 2001, the government has been forecasting 3.0% growth, revised down from 3.2% in July because of the economic slowdown. The figure had originally been set at 3.6%.

But for 2002, the government isn't expected to revise down its 2.4% forecast, especially as it has already lowered it from 2.9% late last year.

Despite a global slowdown in tourism, Spain so far hasn't seen a shortage of foreign travelers.

Finance Minister Rodrigro Rato recently said despite the current economic slump Spain is now the second most visited country in the world: 2001 was a record year for tourists at 49.5 million, up 3.4% from 2000.

Moreover, in the fourth quarter the decrease was relatively modest, with 14.5 million tourists versus 14.6 million in the same period a year earlier.

Argentina Downplayed

Caja Madrid economist Israel Munoz said one of the keys is private consumption - can it stay strong?

The Bank of Spain said family and government spending continued to support the economy in the fourth quarter, but it noted the deterioration of exports and investment in capital goods as a result of the global slowdown.

The bank said earlier in February it's estimating GDP at 2.3% for the quarter, and 2.8% for the year.

In the third quarter, the national statistics institute (INE) said the slowing in domestic demand has been caused by a slowdown in capital investment in fixed assets, due to the fact that household consumption has remained stable. While the trend clearly leans toward a decrease, "the intensity of the fall is less than that of previous quarters," INE said.

And despite a slowdown in the construction sector, it still remains one of the most buoyant parts of the economy, said Beta Capital economist Felix Gonzalez.

In 2001, Spain achieved a 5.8% year-on-year rise in construction investment, versus a 1.7% average increase for the E.U., according to Eurostat forecasts.

Looking ahead, economists continue to downplay any damage from the Argentine crisis, despite Spanish companies' heavy investment in the region.

Spain's economic cycle isn't closely tied to that of Latin America, they argue, but rather to Europe and the U.S. Less than 1% of Spain's exports go to Argentina.