Spanish PM Mariano Rajoy recently said before Congress that the country has overcome “the worst” part of the crisis. Now we need to wait and see the results. His message and ideas are merely rethoric, since nobody knows when Spain’s economic growth will come and from where. Those sectors that experienced the biggest boom until the crisis -housing, industry- will not likely grow more than 8% of GDP when the economy gets to restart.
Knowing that housing will not be a growth engine and that the public sector has been growing since Franco’s dictatorship came to an end, economists only agree that Spain’s hope are exports. The government should then help companies to sell abroad. But these are empty words unless the origin of goods and the margins are well defined.
Spain is a service industry expert, although this is not enough. Unemployment rate is too high not only because housing plummeted but also because industries and factories represent a smaller chunk of the GDP, they create less jobs and are less competitive in a global economy.
Fixing all this requires time and money but politicians don’t make it their priority. However, some know productivity, education, R&D investment and financial sector recapitalization should be on top of their list.
A few years ago The Economist stressed that the behavior of the Spanish industry was worse than advanced countries’ such as USA, France or Germany, emerging countries such as Brazil, Russia and China and even Greece. Things have to change too much for Spain in order to become a qualitatively developed economy not only large in size. Here are some facts:
– Housing will shrink up to 8% of GDP.
– The industrial sector represents only 13% of GDP and is very focused on automotive, equipment, and chemical sector. Traditional industries such as footwear or furniture (textile being an exception) have collapsed as a result of the currency war and strong international competition.
-Agriculture and food industry will still represent around 10% of GDP, remaining competitive. Its future growth is estimated between 2 and 3%.
-Power, water, sanitation and transport sectors recorded an excess of capacity and had to take refuge in foreign markets like large construction companies. No one expects they will boost the recovery.
– Services sector is a large melting pot that represents about 70% of GDP. Tourism sector needs to prove its power of adapting to the new times.
– Public services represent around 30% of GDP and employ five million people. The cost of maintaining these employees public exceeds 17% of GDP.
– Financial sector after its reform will employ 350,000-400,000 people, 20% less than before.
The future of Spain is uncertain, especially when the crisis has proved that many industries only worked fueled by subsidies. Almost 150,000 companies have disappeared since 2007, most of them SMEs that won’t be able to get their heads off the water.
Both labor market and financial reforms have helped the economy, and yet the big question is which sectors will really bring growth. May be the solution are the 100,000 college graduates who have left the country in search of a better future abroad. They might come back and give Spain’s economy a real push.