Ernst & young: "spanish recovery likely in second half of next year"

The crisis that began in the second half of 2007 is still continuing. The consultancy firm Ernst & Young’s report on Spain’s prospects for the coming years is based on the slowdown in the economy since the first quarter of this year, and which they warn is not likely to get back on the road to recovery until the second half of next year.

But the crisis will not be a short-term adjustment of some past errors. “Many housing prices are probably still overvalued,” says the consultant. El Mundo reported that, according to Ernst & Young’s views, “a significant recovery in residential construction will not be immediate” – a problem, given the important part construction has played in Spain’s economic activity in the last decade.

With a stagnant economy and a tough adjustment in public expenditure, Spain is depending on its businesses and exports to remain competitive. However, private investment is not expected to return to growth until 2013, and then by only 0.9%, when companies will be encouraged “led by the increase in their profits.”

Spending will remain weak due to a combination of a need to reduce past debt, high price increases – of 3.1% in 2011 and 2% in 2012 – and the continued high unemployment. “Poor hiring in the services sector and the temporary contracts during the tourist season has had a significant impact” Ernst & Young stressed.

Source: Kyero.com