Lots of people have been celebrating the Spanish recovery. "From boom to bust to export-led recovery", crowed one Twitter commentator.
This is the reality:
But look at this:
Note the red at the far right. That is deflation. Consumer prices in Spain are falling by about 0.5%, according to the latest figures. To be sure, this is an annual chart: using annual GDP figures, NGDP is about 1%. I don't call that much of a recovery.
And I doubt if the Spanish see it as recovery, either. This is GDP per capita:
So if the "recovery" is largely due to falling consumer prices flattering real GDP, what about those exports?
Here's the Spanish current account:
This looks like something of a success story. The current account is indeed slightly positive, which might indicate a trade surplus (more on that shortly). More importantly, though, the very large imbalances that built up prior to the 2008 crisis largely due to inflows of capital into Spain's overblown construction industry have unwound. This is a much healthier current account than six years ago. But the cost has been terrible. Spain's construction industry was a major source of employment. This is what happened when the property bubble burst and the construction industry collapsed in 2008:
latest forecast of the sustainable (i.e. non-inflation accelerating) rate of unemployment is 18.9%. This is based upon a Phillips curve relationship which assumes growth returning to something like 3%. But structural unemployment at this level is a considerable drag on both growth and public finances. Putting it bluntly, if Spain is to recover AND put its public finances on to a sustainable path, about a fifth of its current population must leave.
So for the Spanish people, there really is not much to celebrate, is there? But wait. What about those exports?
Here are Spain's exports:
And these are imports:
I can't see anything to celebrate.
Magical thinking at the G20 - Pieria
* This is a chart of quarter-on-quarter percentage RGDP growth. Annual percentage growth is 1.6%.