According to Patrick’s proprietary model, Spain will experience slow economic growth over the coming decades. The population is still growing, which is better than much of Europe, but the growth is limited. Since consumer spending accounts for a large component of gross domestic product (GDP), anemic population growth generally leads to anemic economic growth. The situation is exasperated by very high levels of government debt, leading to unavoidable austerity measures in the years ahead.
Like most of Europe (and, indeed, the entire developed world), Spain has a “youth deficit” relative to the rest of the world. The proportion of young people is much lower than in other countries. The negative side-effect is lower population growth but the positive is greater political stability. Social unrest and political volatility is highly correlated with “youth bulges” or baby booms. Young people are generally underemployed and financially frustrated, leading to protests and demonstrations. In Spain, the proportion of young people is smaller but their current level of discontent is very high. They will undoubtedly make their concerns heard but will do so in organized and largely civilized ways. Physical violence is unlikely.
Spain has a high median age and life expectancy. There aren’t many young people and the average citizen lives 81 years. The population is growing but only by 12% between 2010 and 2050. By comparison, the American population will grow by 29% and the global population will grow by 34% during the same time period. Also, Spain’s membership in the Eurozone is a competitive disadvantage in international markets because the less productive Mediterranean countries are eclipsed by the more productive northern and Nordic countries, all of which contributes to Spain’s modest trade deficit.
The interesting thing about the graphic below is the disproportionate population profile relative to the rest of the world. Spain has far fewer young people as a proportion of their total population and a lot more older retired citizens. These retired people strain Spain’s public resources through the country’s entitlement programs and the lack of young people contributes to slower population growth in the years ahead. And with unsustainable public debt levels, further austerity measures are likely, creating a vicious cycle of economic contraction and further cuts. It will be years before Spain emerges from its current malaise with a strong economy led by private sector growth.
DISCLAIMER: Projected results are NOT guaranteed. The forecasts for Spain above were calculated based on projected population data obtained from the World Bank website. The economic forecast used this demographic data along with adjusters for net exports, relative age distribution and per capita income projections. The political volatility forecast used the same demographic data along with adjusters for youth population percentage, projected economic growth and public government debt level. Please see the model methodology for more details.
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