How does the Brexit scare affect Spain?

The fallout from Brexit may be a headache for Spain, with the country’s financial sector already suffering as a result of the economic fallout from the UK’s vote to leave the EU.

A new report from Credit Suisse, however, suggests that the country may see a boost in demand for financial services.

The consultancy said Spain’s trade deficit with the EU has been reduced by a further €1bn (£1.1bn) in 2017 as a direct result of Brexit, but it also predicted that this would shrink to just €2.6bn in 2020.

This means that Spain’s deficit would be smaller than expected this year, the report said, but there was some doubt about whether the decline would be permanent. 

However, the number of transactions between Spanish companies and the EU will still grow, so Spain may see an increase in demand.

The country’s total trade with the bloc in 2017 was €2,737bn, according to the report, with a deficit of €1.6 billion. 

In 2020, the deficit was estimated to be €2bn, but Credit Suiss predicted that it would be reduced to just $2bn in 2021, as a “short-term rebound” from Brexit takes effect. 

“The main reason for the fall in the deficit is that Spain has reduced its trade deficit by about €1 billion since 2020,” the report concluded. 

While the report is not a definitive answer on what will happen to the economy in the months and years to come, it suggests that Spain will still be a net exporter of services.

“The economy has recovered substantially from the recession of the late 1990s,” the researchers wrote. 

The authors noted that the number and size of businesses has been boosted by the financial sector’s return to profitability, as well as the construction boom, which has been helped by the government’s decision to ease restrictions on foreign investment.

“In contrast, the construction sector is likely to experience an economic downturn,” they said. 

Overall, Spain’s economic situation is stable and improving, they said, “but the economic outlook is still challenging.”

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