The crisis was the focus of the recent G20 meeting in London where the leaders of the world’s leading countries came together to try and work out a framework for the rescue and recovery of the world’s financial system and, as a consequence, the recovery of the worldwide economy at large.
In recent times we have seen a large number of developments, stimulus plans, recovery packages, or bailout initiatives, all of which seek to achieve the same result. We have seen central banks pump billions upon billions of dollars into the world’s economy and, in addition, we have seen the slashing of central bank interest rates to unprecedented levels aimed at reducing the cost of borrowing enabling families and small businesses alike to once again enjoy the credit facilities at the prices and costs they had once enjoyed. Banks have come under increasing pressure to unfreeze credit, to lend further and cheaper and, to a certain extent, the benefits of this approach are becoming, at least faintly apparent.
On a local level, we have much to thank our lucky stars for. Somehow, we always tend to assimilate and deal with difficult global situations and come out at the other end in a far better position than most other places we hear about on the news. You needn’t look any further than our neighbours across the border for an illustration of how well we’re fairing in an international context.
A short drive up the coast reveals that the majority of property developments have ground to a halt. Not only are developers unable to complete the projects for which they took hundreds of thousands if not millions of Euros from purchasers as deposits, they are also suffering from significant losses of raw materials from their sites as a result of being unable to pay for even basic security arrangements. Spain’s unemployment has reached record levels down in no small measure to the over reliance over the last 20 years of the Spanish market on construction of residential property. This ‘boom’ has been followed by a bust that sees an oversupply of residential property, either complete or in an advanced stage of completion, which leaves little scope for demand for new property in the short to medium term, even if the economy does sputter back to life. It’s also clear that the strength of the euro in respect of most international currencies has resulted in a desperate lack of investment from abroad.
Construction work continues apace here in Gibraltar. Property prices are holding steady even though purchasers have obviously become far more discerning than they ever used to be. Gibraltar boasts a very diverse economy, one of the most diverse economies of small jurisdictions around the world which is reflected in our continued resistance to the worst effects of the global economic crisis. In stark contrast to the effect it has had on Spanish economy, the relative weakness of sterling against the euro has seen the local economy benefit on at least three fronts. Locals spend more money here, Spanish frontier workers leave more of their salary in our economy and the growth of ‘supermarket tourism’ from across the border.
Gibraltar is not immune to the effects of the global crisis, but remains strong in the face of it. At the gates to a Mediterranean economic area plagued by financial turmoil, much of our continued resilience is down to the fact that our size precludes us from experiencing the worst effects of economic downturn in much the same way as it precludes us from mage riches when things are going well. Gibraltar remains an interesting and diverse product which appeals to a wide cross section of local and international consumers, whether it be our financial services or tourism offerings, a product which will no doubt continue to be attractive for many reasons for a long time yet in times of wide spread instability. Truly, one of the Pillars of Hercules.