Spain is a country in Southwestern Europe, located on the Iberian Peninsula together with Portugal. With an area of 505,990 sq km, it is the fourth-largest democracy in Europe.
The capital and simultaneous the biggest city is Madrid, with almost 3.4 million inhabitants. In addition to the mainland of Spain, several island groups belong to the country. These include but are not limited to the Canary Islands, which are just off the coast of North Africa and about 100 km from Morocco, and the Balearic Islands, near the east coast of Spain's mainland.
Spain has 47.3 million inhabitants, which makes Spain the sixth-biggest country in Europe measured by the population.
Table of Contents
1 Description of Spain and its economy
2 Spain rating according to Moody´s
2.1 Description of Moody´s rating methodology
2.2 Application of Moody´s rating methodology on Spain
3 Travel and tourism sector and related risk
4 Forecast of international tourists visiting Spain
4.1 Triple exponential smoothing
4.2 ARMA (1,1)
Objectives and Topics
The primary objective of this work is to evaluate Spain's economic situation and sovereign creditworthiness through Moody's rating methodology, while simultaneously analyzing the impact and future trends of the tourism sector on the Spanish economy using statistical forecasting models.
- Analysis of Spain's macroeconomic indicators and current economic structure.
- Detailed application of Moody's rating system (Economic, Institutional, Fiscal, and Event Risk) to the Spanish case.
- Evaluation of the influence of the travel and tourism sector on national GDP and employment.
- Comparative application of Triple Exponential Smoothing and ARMA(1,1) models to forecast future tourist arrivals.
Excerpt from the Book
1 Description of Spain and its economy
Spain is a country in Southwestern Europe, located on the Iberian Peninsula together with Portugal. With an area of 505,990 sq km it is the fourth largest democracy in Europe. The capital and simultaneous the biggest city is Madrid with almost 3.4 million inhabitants. In addition to the mainland of Spain, several island groups belong to the country. These include but are not limited to the Canary Islands, which are just off the coast of North Africa and about 100 km from Morocco, and the Balearic Islands, near the east coast of Spain´s mainland. Spain has 47.3 million inhabitants, which makes Spain the sixth biggest country in Europe measured by the population.
Spain is Part of the EU and the currency used in Spain is the Euro. Also Spain is part of the OECD and WTO. The 47.3 million inhabitants produce a yearly gross domestic product (GDP) of €1,122bn in 2020, which means a GDP of €25,611 per capita. With this GDP Spain is the 14th biggest economy in the world. However the GDP stagnated since 2008, when Spain, after the financial crises plunged into a recession and entered a cycle of negative macroeconomic performance. This is illustrated in the following figure.
Summary of Chapters
1 Description of Spain and its economy: This chapter provides an overview of Spain's geographic, demographic, and macroeconomic profile, highlighting its role within the EU and the challenges faced post-2008.
2 Spain rating according to Moody´s: This chapter details Moody's credit rating methodology and applies its four main factors to assess the sovereign credit profile of Spain.
3 Travel and tourism sector and related risk: This chapter discusses the significant role of the tourism sector in the Spanish economy and examines the vulnerabilities caused by the COVID-19 pandemic.
4 Forecast of international tourists visiting Spain: This chapter presents quantitative forecasts for international tourist arrivals using Triple Exponential Smoothing and ARMA(1,1) methodologies.
Keywords
Spain, Moody's, Credit Rating, Macroeconomics, GDP, Tourism, Economic Resiliency, Fiscal Strength, Institutional Strength, Forecasting, Triple Exponential Smoothing, ARMA, Time Series Analysis, Sovereign Risk, Pandemic Impact
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines the economic state of Spain and assesses its credit risk based on Moody's rating methodology, while analyzing the tourism sector's impact.
Which rating agency's methodology is applied?
The work utilizes the official rating methodology provided by Moody's Investors Service.
What are the four main factors in the rating process?
The methodology relies on Economic Strength, Institutional Strength, Fiscal Strength, and Susceptibility to Event Risk.
What forecasting methods are used?
The author uses Triple Exponential Smoothing and the ARMA(1,1) model to project tourist arrival numbers.
How is the tourism sector integrated into the economic analysis?
The sector is identified as a major driver of GDP and employment, with its performance being essential in offsetting Spain's persistent trade deficit.
What data is used for the time series analysis?
The forecasts are based on historical annual data of international tourist arrivals in Spain from 1995 to 2020.
Does the calculated rating match the official Moody's rating?
The result from the paper differs slightly from the official "Baa2" rating, likely due to the inclusion of additional data and expert sentiment by Moody's.
Why did the tourism numbers drop so significantly in 2020?
The decline was primarily caused by the onset of the COVID-19 pandemic and subsequent lockdowns in Europe.
How does the ARMA(1,1) model perform compared to the smoothing method?
The ARMA(1,1) model demonstrated a better capability to forecast the sharp decline observed in 2020 compared to the exponential smoothing approach.
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- Philipp Rothe (Autor:in), 2021, Developing a country rating for Spain according to Moody's rating methodology, München, GRIN Verlag, https://www.grin.com/document/1357314
