Spain’s Price Competitiveness Worsened In 2017 Compared With The OECD, BRIC Countries

Spain's price competitivenessSpain's price competitiveness

Spain ended 2017 with a loss of price-competitiveness at an accumulated level in comparison with the EU (0.8%), as well as with the OECD (1.5%) and the BRICS – Brazil, Russia, India, China and South Africa – (0.5%), according to the Index for the Trend in Competitiveness (ITC).  This is calculated with the CPI and was published on Wednesday by the Ministry of Economy, Industry and Competitiveness. That said, in the fourth quarter the index improved 0.2% with respect to the EU, which signifies a change in trend after five quarters of declines. This was thanks to the slight depreciation in the euro compared with other currencies in the región (-0.1%) and to the slight fall in the index of relative consumer prices (-0.1%).

That said, Spain’s price-competitiveness compared with the Eurozone, the main destination for its exports, worsened slightly. The ITC rose 0.1% in the fourth quarter.

The rise was lower than that in the third quarter (0.3%) due to the fact that the average increase in prices in the Eurozone was slightly below that registered in Spain.

On the other hand, Spain gained in competitiveness compared with EU countries which don’t form part of the euro. The ITC dropped 1.1%, mainly due to the 0.8% reduction in the index of relative prices, as well as to the slight depreciation in the euro compared to the average of the currencies in these countries (-0.3%).

Compared with the OECD, the ITC registered a “notable deterioration”rising 3.3%. This was the result of the 3.8% appreciation in the euro, particularly against the dollar and the yen, while the index of relative prices fell 0.4%.

With respect to the BRICS (Brazil, Russia, India, China and South Africa), the ITC rose 4.6% year-on-year in the fourth quarter. In this case, the worsening of the competitiveness was due to the 5.2% appreciation in the exchange rate, given that prices fell 0.6%.

The ITC measures the competitiveness of exports via the exchange rate and prices. So rises in that index reflect losses in competitiveness and vice versa.