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As a capitalist mixed economy, Spain is the world’s 14th largest economy in the world, 5th largest in Europe, and 4th largest in the Eurozone, based on nominal gross domestic product statistics. Further demonstrating its economic superpower and noteworthy global rankings, Spain is a respected member of the European Union (EU), the Organization for Economic Co-operation and Development (OECD), as well as the World Trade Organization (WTO). Adding to impressive statistics, the nation was the 12th largest exporter of domestic goods in the world and the 16th largest importer. Furthermore, Spain also holds the title for 10th place for highest quality of life in the world, as well as the 25th highest ranking country on the Human Development Index kept by the United Nations.
Many of Spain’s impressive rankings took a major hit during the global financial crisis in 2007. In fact, the Spanish economy plunged deep into a recession, which was not uncommon during the time; however, the economy stayed in recession far longer than most other developing or developed first-world nations. During this time of economic contraction, Spain lost approximately 10% of its gross domestic product as well as around 25% percent of its workforce. It took Spain almost a decade to reverse the trade deficit that had been built up over the recession and begin to manage a successful trade deficit again by 2013.
By 2015, the Spanish economy witnessed a strong recovery thanks to a stronger than expected growth rate not seen since before the onset of the global financial crisis. In totality, Spain has more growing to do before completely recovering from lost gross domestic product during the recession. Many market-players around the world praise the nation’s current recovery as a great example for economic reform, with Spain growing twice as fast as the Eurozone average during 2016. Unemployment rates have also seen heavy reduction, however there are still millions of Spanish citizens belonging in the grey market, where workers are considered to be performing some form of paid labor but are not engaged in full-time employment. This article will cover the financial system of Spain, as well as a range of market information covering currency, futures, and stocks.show more
Madrid’s own stock exchange, known as Bolsa de Madrid Exchange (BME), is the most sizeable and most international of Spain’s four stock exchanges. Like all exchanges, the Bolsa de Madrid trades equities, bonds, and derivatives from both private and state-owned sectors. The exchange itself is owned by Bolsas y Mercados Españoles, a Spanish investment company that owns all four Spanish exchanges. Spain’s markets were reclassified under the federal shield of the Spanish stock market to include futures. All trading on Spanish exchanges are done electronically through a system known as the Spanish Stock Market Interconnection System (SIBE).
The strongest members of the European Union (EU) who have chosen to adopt and circulate the euro are mainly the largest economies in the Eurozone, with the exception being the economy of the United Kingdom. All of these countries together form an economic superpower that backs the aforementioned euro. Benefits of euro adoption includes minimized risk of diversification as well the strength that economic allegiances can bring to the table. Naturally, there are risks associated with adopting a currency that mainly applies to the smaller economies within the EU, such as delegating monetary policy power to the European Central bank which is limited to operating in the best interest of the union as a whole, and not necessarily in the best interest of smaller, more fragile economies.
The euro is the second most popular currency in the world after the United States dollar. It accounts for approximately some $600 billion dollars in volume daily alone and is most commonly traded pair in the world when traded against the American dollar known as EUR/USD. Other popular pairs include the EUR/GBP, EUR/JPY, and the EUR/AUD. The euro is not correlated with any major commodity or single export.
Although Spain has formally adopted the euro, it spent the previous two centuries using the peseta as its centralized currency. Starting in the late nineteenth century the peseta came into usage under Queen Isabel the second. Herself, along with several other royal entities were previously commemorated on the nation’s coinage and banknotes. The peseta could be further divided into 100 cents called centimos and was also divided into fourths known as reales.
The most powerful of the Spanish stocks are tracked by the major index of the Madrid Stock Exchange, known as the Madrid Stock Exchange General Index (IGBM). The index mirrors the 35 most liquid pillars of Spain’s economy by representing financial services, telecommunications, energy, construction, and market services sectors. While these industries encompass the strongest companies in Spain and thereby represent good investment opportunities, the political and economic environment of Spain is still uncertain at this stage. Financial uncertainty exists while Spain continues its road to recovery has a great hold over the financial institutions and can have an adverse impact on Spanish investments and companies.