Bank of Spain Reduces Growth Forecast as Demand Slows
The Bank of Spain has reduced its growth forecast for the coming year from its previous 3.1% to a more modest 2.4%. This is reflection of the sharp Spanish property sales slowdown, higher commodity prices and lower demand both from consumers and external markets.
According to Economy Minister Pedro Solbes “The effects of recent financial turbulence could be more acute than expected, which could also exacerbate the drop in the Spanish housing market…….”
The global credit crisis has resulted in banks and other lending institutions placing more stringent conditions on loans and the recent increase in mortgage interest rates has resulted in families cutting back spending on consumer goods in order to pay their mortages.
January 2008 figures show that there has been a drop of 27% for year on year Spanish property sales. This has resulted several major Spanish property companies like Cosmani and Labaro going into administration as lower sales fail to cover their debt payments.
