Three External Tailwinds Turn into Headwinds for Spain’s Economy

With impeccable timing, all at the same time.

The Spanish economy has been growing at a fair clip since emerging from the deepest depths of recession at the tail-end of 2013. But the good times could soon be over, as the external economic environment becomes a lot less amenable to its needs. As the Spanish daily El Mundo recently pointed out, the three main external tail-winds that helped sustain the recovery — the rise of geopolitical risks affecting rival tourist destinations, the ECB’s expansionary monetary policy, and super-low oil prices — are beginning to change direction. And potentially all at the same time.

1. Peak Tourism.

Judging by the explosion of tourism phobia in the last two or three years, Spain’s tourist industry has probably already reached the limits of its growth. Visitor numbers have experienced year-on-year growth for eight consecutive years. The total number of tourists reached 81.8 million last year, almost 30 million more than in 2010.

In large part the boom is a result of the surge in geopolitical risks affecting rival tourist destinations like Turkey, Egypt, Tunisia and, in smaller measure, France, which helped boost the number of foreign visitors to Spain in 2016 to a historic record of 75.3 million people — an 11.8% increase on 2015 — before setting another record in 2017.

Now, there are signs that those markets are beginning to bounce back. A few weeks ago the executive vice-president of industry lobbying group Exceltur, José Luis Zoreda, warned of a notable recovery in demand for these rival countries, in particular Turkey and Egypt. And that can only be bad news for Spanish tourism, which is estimated to have provided as much as 0.4 percentage points to GDP growth in recent years

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