Moody’s rating agency has confirmed their support for Spain’s Austerity Plan 2010-2013, stating that measures outlined are credible and reinforces the country’s Aaa rating.
Spain recently delivered its new plan that aims to cut the country’s public deficit from its current level of 11.4% of gross domestic product (GDP) to 3% of GDP by 2013. These measures will bring the deficit back in line with European Union directives and enable the government to regain control by substantially reducing central government spending.
The confidence in the Aaa rating is good news for the country which has seen a deluge of scepticism about its economic recovery. It should also bolster confidence amongst investors who may be considering Spain for potential investment opportunities.
The rating assesses long-term obligations, “the possibility that a financial obligation will not be honoured as promised”, reflecting the likelihood of financial loss or default. The Aaa investment rating is the highest and grades Spain to be “of the highest quality with minimal credit risk”.
Regarding Spain’s economic recovery, Moody’s said, “The economy will not bounce back to the 3.25 percent to 4 percent growth rate it averaged in the last cycle, it will nevertheless average a more moderate, but still respectable 2 – 2.25 percent pace of growth once the excess supply from the construction cycle has been eliminated”.
It has already been noted the increased interest for property in Spain during the first weeks of 2010. Many in the overseas property industry have already highlighted the country to be the number one destination for overseas property investment in 2010.
In addition, the Bank of Spain has told banks they must devalue their property assets by 20%, according to El Mundo. Following unexpected results posted by a number of major banks recently, analysts have highlighted that Spain’s banks have been valueing their real estate assets “pre-crisis levels”. This has been holding property stock values at inflated prices not reflecting the 14% drop since the peak values of 2007.
Increased demand and correctly priced property stock will further entice both investors and property buyers to the market reducing the oversupply of property stock in Spain.
Source: Interactive Investor, Reuters, aboutproperty.co.uk
