Over the last month, Fitch Ratings has revised upwards its growth prospects for Spain in 2015 and 2016, to 2% and 2.3%, respectively. In this context of recovery, the agency notes that “new credit growth has been more robust during the first quarter of 2015” and it expects this trend to continue for the rest of the year. Although, the pace will depend on “the strength of the economic recovery and consumer confidence”. “The banks’ healthier balance sheets and initiatives being taken by the ECB to improve liquidity, including the TLTRO (long-term auctions) should support this increased lending”.
Fitch makes these reflections upon publication of its Fitch Spanish Fundamentals index, which analyses changes in the fundamentals of credit, taking into account the key indicators of the Spanish economy: the evolution of mortgages, SMEs and securitisations, the expected EBITDA (gross operating profit) and capital expenditure (capex) of companies, ratings outlook, CDS forecasts, new credit, unemployment prospects and trends in transport. The index ranges from 1 to 10 and Spain is awarded a six, which shows that “its recovery is holding up”.
Unemployment
In terms of unemployment, another one of the key variables that Fitch uses in its new index, the agency forecasts that the rate will amount to 22.5% and 21% in 2015 and 2016, respectively. “This positive trend in employment will support domestic demand. The increase in real disposable income, together with the fall in oil prices, should also drive economic growth”. Nevertheless, in the agency’s opinion, unemployment continues to be too high and, as a counterpoint, it warns that the non-financial corporate sector is continuing to deleverage.
The agency confirmed Spain’s BBB+ rating in October last year with a stable outlook.