SPAIN’S EXPORTS KEY GROWTH DRIVER

Spain's Exports Key Growth Driver

Spain’s Exports Key Growth Driver

Spain is betting on exports to drive future economic growth and the latest data shows it’s right on the money!

Currently export levels of Spanish goods and services account for a record 33 percent of the country’s GDP, placing it second only to Germany  among the main EU economies.

According to the European Commission, Spain’s exports are expected to rise by 4.2 percent in 2013, topping the European average.

But between the boom years of 1998 and 2007, the situation was different and Spain’s competitiveness dropped sharply.

This was due both to higher unit labour costs than its trading partners and to the low level of productivity per capita in the construction sector, the main economic driver over the decade.

So how has Spain boosted its “exportise” ?

INTERNATIONAL POWERHOUSE

As the economic and financial crisis continues to batter domestic demand, Spain has managed to redirect its production output away from the home market and towards the international community.

Exports are currently up 15 percent on pre-crisis levels, the only component of aggregate demand which has exceeded the pre-crisis level.

Some factors behind this positive trend:

• Labour unit costs have fallen since the start of the crisis due to a combination of increased productivity and lower wages.

• The government’s labour market reform is preventing wages rising in line with inflation, making the workforce more flexible and more competitive.

• Exports from the services sector are booming and not just as a result of the uptick in tourism revenues in the last 18 months.

The export of other services such as engineering, one of Spain’s specialities, is also contributing.

Amongst the sectors best positioned to export, machinery and metal products currently stand out for their share of Spanish exports.

IS THE GROWTH SUSTAINABLE?

In 2012, around 20,000 companies contributed to 90 percent of total exports and represented 15 percent of all Spanish companies.

Many of these companies are global champions such as Galician fashion retailer Inditex or car manufacturer Seat, a subsidiary of the Volkswagen Group.

But some of Spain’s small and medium-sized enterprises (SMEs) also have overseas ambitions. This is an important development as SMEs account for about 70 percent of the Spanish economy.

Spain’s exporting strategy is smart and orientated towards the medium-long term. It is targeting emerging and fast-growing markets like Africa, the Middle East and the Far East, all of which have untapped export potential.

Initial low levels and Spain’s regained competitiveness will secure future strong growth.

Spain’s export production output is traditionally inelastic unlike the exports of many emerging countries such as China.

This will ensure Spanish exports will not only continue to grow but will experience much less volatility.

Last but not least, Spain is still attracting foreign investment but this is no longer aimed at funding real estate promotion, solar energy parks or leveraged buy-outs. It is now aimed at new industrial activity with export capacity.

Contact Argali Abogados for more information!

Leave a Reply