The Economist magazine forecasts that Spain will avoid a recession in 2009 by the skin of its teeth, growing by 0.3% in the year. This puts The Economist at odds with the IMF, who expect Spain to go into recession in 2009, but is much more downbeat than the Spanish government’s forecast of 1% growth in 2009.
Economic growth is crucial to Spain’s housing market, as without economic growth there is no job creation, and without new jobs there are fewer buyers to help mop up Spain’s monumental housing glut of over 1 million homes, many of them new. If Spain goes into recession, as the IMF expects, Spain’s housing market crash is sure to will be long and painful.
Even if Spain manages to avoid a technical recession (defined as 2 quarters of negative growth), the going will be tough in the Spanish property market with economic growth as low as the 0.3% forecast by The Economist. Given immigration and demographics, unemployment would shoot up in Spain with growth that low, creating social problems and putting pressure on the fiscal budget.
In The Economist’s forecasts for 13 countries, the UK comes out the worst with forecast growth of just 0.1% in 2009, below Spain and Italy with 0.3%. If the British economy does teeter on the edge of a recession, as The Economist expects, this will also be bad news for the Spanish housing market on the coast, as, after the Spanish, the British are the biggest buyers of Spanish coastal properties.