S&P forecasts Spanish growth of 0.7% for 2011

 

The Standard & Poor credit rating agency confirmed its 'AA' long-term and 'A-1+' short-term sovereign credit ratings on the Kingdom of Spain earlier today.

These ratings Spain show a considerable growth spurt in both budgetary consolidation and the structural reform effort since 2010, Standard & Poor's credit analyst Marko Mrsnik said. Additionally, the country stands to benefit from its moderate general government debt.

"Nevertheless, we believe that the ratings will remain under pressure from what we deem to be high private-sector indebtedness, challenges to the economy's competitiveness, persistently difficult labor market conditions, and the economy's weak net external financial position," he commented.

The outlook on the ratings remains negative, suggesting a possibile downgrade if the economic situation of the country worsens. S&P forecasts the Spanish economy to expand approximately 0.7% this year following the 0.2% contraction reported for last year. They continued, stating how recovery is subject to significant downside risk due to the private sector's continuous deleveraging, limited growth prospects, persistently high unemployment and large net external debt.

"We believe that these factors make the economy vulnerable to sudden shifts in external financing conditions, possibly complicating the country's economic recovery," Mrsnik said.