In Almeria’s Cabo de Gata natural park, one of the only unspoilt stretches left of Spain’s southern coast, Hotel Tio Kiko is close to full. Its owner, Jose Venzal Alonso, isn’t optimistic though.

“I can’t say I see an economic recovery,” the 51-year-old hotel manager says in a telephone interview, speaking with a heavy southern Spanish accent. “All our clients are saying so, that they can’t afford to stay more than three days when they would happily come for six before the crisis. We used to have a full house much earlier in the season.”

Spain’s dependence on foreign earnings from exports and the summer tourism boom has intensified since a real-estate crash and the deepest budget cuts in its democratic history crippled domestic demand. With that seasonal boost to employment and growth in full swing, Prime Minister Mariano Rajoy is counting on an economic recovery in the second half of this year to help curb surging public debt.

Economy Minister Luis de Guindos said Spain is in a “comfortable situation” in terms of funding and liquidity, according to a July 20 interview in Moscow, where he met with Group of 20 finance ministers. The yield on Spain’s 10-year benchmark bond fell three basis points to 4.65 percent at 9:36 a.m. in Madrid, compared with a euro-era high of 7.75 percent in July 2012.

‘Seasonal Boost’

Data this week will show how viable Spain’s recovery hope is, as the Bank of Spain releases a report predicted by economists to estimate that the economy contracted for an eighth quarter during the three months through June. Labor market numbers will also show whether unemployment rose to a record in that period.

“Jobless numbers adjusted for the seasonal boost due to tourism show unemployment is still climbing,” said James Howat, an economist at Capital Economics Ltd. in London. “Fast enough economic growth to generate net increases in employment remains a distant prospect.”

Economists forecast the country’s jobless rate to rise to 27.2 percent in the second quarter from 27.16 percent in the previous three months, according to the median of seven estimates in a Bloomberg News survey. The release is due July 25. The Organization for Economic Cooperation and Development now predicts unemployment to climb to around 28 percent in Spain next year.

‘Inner Destination’

Guindos said last week that there are signs that domestic demand in Spain, the euro-area’s fourth biggest economy, is stabilizing. Government data show resident tourists helped boost visitor numbers in May as the peak season started with a 6.45 percent increase in overnight stays in hotels compared with a year ago.

The weight of tourism in the economy has remained stable throughout the economic slump, which was triggered in 2008 by the end of a decade-long real estate boom. It contributed to 10.8 percent of Spanish output and 12.2 percent of jobs in 2011, the most recent data available show.

Rajoy’s cabinet last month approved a domestic advertising campaign under the slogan of “Spain, your inner destination.” The government doesn’t see tourism expanding this year as a 10th of Spanish households don’t have a single breadwinner left.

Gross domestic product probably contracted 0.3 percent in the second quarter after a 0.5 percent drop during the previous three months, according to Bloomberg’s monthly Spanish economy survey published July 11. Rajoy’s prediction of a recovery this quarter may be premature, as economists in the survey don’t see the economy returning to growth before next year.

Cheap-Booze Vacations

The Spanish government is trying to promote higher-end tourism after benefiting for years from the success of sun- guaranteed, cheap-booze vacations on the country’s coasts.

It is encouraging farmers and rural homeowners to come up with standards of comfort for accommodation and endorsing birdwatching vacations to lure people to come to Spain as the nation’s beach holiday market suffers from Greek and Turkish competition. The number of foreign tourists that visited Spain in May increased by 7.4 percent from a year earlier, according to government data.

Weak growth at best can be expected even as industries including tourism benefit from high unemployment, allowing hotels and restaurant to hire temporary workers on lower pay, said Ricardo Santos, an economist at BNP Paribas SA in London.

‘Severe Constraints’

An “end of the recession doesn’t mean problems are solved,” he said. “The private sector is still under severe constraints and resistance to reforms and budget cuts will grow.”

Spain’s budget deficit was the widest in the European Union last year after the nation secured international aid to bail out its banking sector. European Central Bank President Mario Draghi this month called on the country to continue strengthening its financial sector as bad loans increased, climbing to 11.2 percent of total lending in May.

“The recovery is going to be very difficult,” said Alfredo Arahuetes Garcia, who is head of the economy department at Pontificia Comillas University in Madrid. “There are no foundations for growth, the real-estate crisis isn’t over, reforms are very slow and our debt keeps rising. There may be positive signs, but there are certainly no motives for joy.”

Back in Almeria, Venzal doesn’t see Hotel Tio Kiko coming out of crisis mode anytime soon. As the rooms fill up, he starts work at 6:45 a.m. to prepare breakfast and works all night one day a week when his night guard rests.

“I’ve had to cut costs, lower my prices, I can’t hire helpers back,” he says. “This has been a disaster.”

With assistance from Patricia Laya in Madrid and Stepan Kravchenko in Moscow. Editors: Zoe Schneeweiss and Craig Stirling.

To contact the reporter on this story: Angeline Benoit in Madrid at To contact the editor responsible for this story: Craig Stirling at

Tags: economy, spain
Photo Credit: Sunbathers crowd the beach in Ibiza, Spain. Philip Larson / Flickr