FocusEconomics Insights - Latest Posts
October 27, 2017
On 26 October, President of Catalonia Carles Puigdemont put the decision of independence in the hands of the region's parliament. The move almost guarantees that the Spansh Senate will decide on 27 October to approve measures that will allow Spain to take complete control over the semi-autonomous region's government, as Spanish Prime Minister Mariano Rajoy's conservative party holds a majority. How this all affects the economy of both the region and the country as a whole is uncertain, however, cracks have begun to show recently as the Spain-Catalonia situation has escalated.
October 23, 2017
“Spain is not in an economic crisis.” These were the now immortal words of Spain’s then-President José Luiz Rodriguez Zapatero in response to the turmoil which swept through the world economy in 2007–2008 and led to the worst recession Spain has seen for decades.
The Spanish economy boomed throughout the early 2000s, as inward investment from the rest of the EU and low interest rates fed a colossal housing bubble. With the onset of the global financial crisis, the music abruptly stopped. The housing bubble popped spectacularly, GDP nosedived and the unemployment rate soared to over 25%, the highest in the EU. Youth unemployment reached an eye-watering 50%, prompting an exodus of skilled young professionals, with many moving to the colder climes of northern Europe in search of work.
Worryingly, the unemployment rate hit similar heights during the 1990s, and had struggled to dip below 8% even at the peak of giddy economic optimism in the mid-2000s. This hints at deep-seated structural problems in the Spanish labor market, rather than a mere passing phenomenon.
October 19, 2017
Global inflation inched up from 3.1% in July to 3.2% in August. Inflation accelerated in the U.S. as hurricane-related disruptions caused gas prices to spike, while in the UK inflation came in above market expectations as the pass-through effects of the weakened pound continued to feed higher prices. Inflation also trended higher in the Euro area on the back of higher prices for non-core goods. Among the key emerging market economies, inflation accelerated in China and India while it decelerated in Brazil and Russia.
Although risks to inflation from a global perspective remain mostly tilted to the downside, mounting inflationary pressures in Latin America, primarily focused in inflation-ridden Venezuela, caused the FocusEconomics projection for 2018 global inflation to increase to 4.7%, which is up 0.3 percentage points from last month’s estimate. This year, the panel sees inflation averaging 4.9%.
October 18, 2017
Economic crises are part of Latin America’s collective unconscious. In the beginning of the 1980s, the exhaustion of the economic model based on industrialization led to the debt crisis that gave rise to what is known as the "lost decade". From then on, over the course of more than twenty years, crises affected most of the countries of the region at various points in time. This stage however, is now in the past. "Dictatorships have ceased to be the norm and in most of the region, government institutions have improved, there is more responsible economic policy in place, and better and stricter fiscal and monetary policies have been implemented," according to a study by Pablo Bejar, a researcher at the Inter-American Development Bank (IDB).
October 17, 2017
Last year we began a series of posts in which we answer typical questions about the various commodities we cover with our Consensus Forecast commodities report. Last year we wrote posts on Brent and WTI crude oil as well as gold. This time out we will be covering iron ore, one of the most important yet underappreciated commodities. Keep checking back with us for more in our commodities explainer series.
October 16, 2017
It’s a Friday evening in Barcelona, and just as she has done for decades, Carmen Cano is making dinner. She prepares simple, rustic fare: chicken, rice and steamed vegetables. Unfortunately, this type of healthy-but-hearty dish is becoming ever more of a rarity here.
October 11, 2017
The quality of infrastructure in Latin American countries compared to other regions of the world is only better than that of African countries and is not even half as good as that of developed countries. According to the Latin America Development Infrastructure (CAF) report, published in 2016, the infrastructure gap remains significant. Taking into consideration current trends, it is estimated that the region would have to work for two decades to reach the current level of infrastructure in the OECD countries.
Several studies recommend that in order to catch up, Latin American countries must invest around 5% of annual GDP. In recent years, investment in infrastructure has oscillated between just 2.4% and 3.2% of GDP. In order to address this situation, involving both the public and private sectors is essential.
October 3, 2017
Written by Jan Lammersen, Economist
The effects of Brexit on both individual Eurozone countries and the area as a whole remain shrouded in uncertainty. While negotiations on the United Kingdom’s divorce from the European Union are still under way, Westminster has released several policy papers to date, none of which were found to be “satisfactory” by the president of the European Commission, Jean-Claude Juncker. Speaking at a conference of EU ambassadors in late August, Juncker commented:
“We need to be crystal clear that we will commence no negotiations on the new relationship—particularly a new economic and trade relationship—between the UK and the EU before all these questions are resolved.”
September 20, 2017
The Northern Powerhouse project has seen progress on several fronts, but striking inequalities remain
September 19, 2017
Iceland is known for its natural picturesque beauty, active volcanos, the northern lights and of course its friendly people. In fact, the country was recently named the friendliest country in the world by the World Economic Forum. However, the one black spot on the country’s nearly spotless record was the 2008 Icelandic banking crisis that left the country’s economy on the verge of complete collapse.
In 2008, all three of Iceland’s major privately owned commercial banks failed and the country’s stock market lost 80% of its value overnight. Brought on by the deregulation of banks in 2001, years of asset inflation and bad loans resulted in a national debt 10 times that of its GDP. The banks eventually defaulted resulting in the largest single banking collapse in world history.
With the economy teetering on the edge after the disaster, the government took emergency measures to get the economy back on its feet and stabilize the Icelandic krona. Nearly 10 years later Iceland has been called a European success story as its economy is now looking like a world beater. The country is on track to be the fastest growing economy among OECD member countries in 2017. And a lot of this is down to the recent boom in tourism and specifically, the hit HBO TV series, Game of Thrones.
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2018 inflation forecast for Central America revised down 0.1 percentage points this month to 3.4%. https://t.co/vCeYnGSmsE
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Political noise and economic imbalances threaten Latin America's economic outlook. Read more:… https://t.co/Wq3z1BuYKF
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Israel growth forecast for 2018 downgraded 0.1% to 3.3%. Find out why: https://t.co/phgVA8YdW7
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