TEN years ago, no conversation with Spanish friends was complete without mentioning ‘la crisis’.
The credit-fuelled construction boom leading to bad debt and a dramatic property price collapse, combined with the global downturn, conspired to produce one of the worst financial problems in European history.
Banks collapsed under the pressure of the bad loans and homeowners simply handed back the keys.
Fast forward ten years and today we see a completely different Spain.
Construction only represents around half of its previous weight in the Spanish economy, exports are up from 25% of the economy to 33%.
Meanwhile, energy companies, banks and financial institutions (with the notable exception of Banco Popular) are posting huge growth in their values. All of this has sent the IBEX 35 ever higher with 19.66% growth this year to date.
Even unemployment, traditionally Spain’s Achilles’ heel, has fallen from a peak of 26% to a still high 17.1%, according to the EU. Still a long way to go on this one particularly bearing in mind the youth unemployment rate of around 38%.
Economic growth of 3.2% in both 2015 and 2016 and projected growth of 3% for 2017, according to forecasts from the OECD and the IMF, may even be enough for Spain to begin to reduce the National Debt (currently 99% of Gross Domestic Product).
All of this paints a very rosy picture for the future of the Spanish economy with most economic commentators agreeing the tide has turned and Spain is on the up.
“That’s all great” I hear you say, “but how can us expats benefit?”
If my experience with clients is anything to go by, the majority of, for example British expats, still have their investments in UK assets and in Sterling, despite living in Spain and needing Euros to fund their lifestyle.
This may have been relatively good news from a growth point of view over the last couple of years, but a longer view may be needed. Consider the backdrop of the falling exchange rate between GBP and Euro, the possibility that the UK economy may be overheated, over-priced and due a correction, Brexit uncertainty and political instability and it may be prudent to think of the wider market rather than just the UK.
With that in mind it may be an idea to consider investing in the economy of the country in which you live and take advantage of the upturn in the Spanish economy to improve your personal economic situation in the process.
There are a large number of investment funds which invest either wholly or in part (via a European fund) in the Spanish stock market.
Tax-efficiency is important when considering the most appropriate Financial Instruments in which to hold the investment to make the most of your money. Expats can access investment in Spain via Pension (QROP’s, International Self Invested Pensions), Lump sum investments via Spanish Tax Compliant Bonds (more on these in a future article) or monthly Savings Plans. Exactly how this is structured needs to take account of your circumstances, risk profile and many other factors.
Maybe it is time to think outside the box, what do you think?
Got a question? Then ask the expert and drop Sandy a line.
Sandy Paterson DipFA, CeMAP, MLIBF – International Financial Adviser
Blacktower Financial Management (International) Ltd – Mallorca Office
Tel: 971 42 59 86
Blacktower Financial Management (International) Limited is licensed in Gibraltar by the Financial Services Commission. Licence 00805B and is registered by both the DGS and CNMV in Spain.
Blacktower Financial Management Limited is authorised and regulated in the UK by the Financial Conduct Authority.