Spanish Companies: From Autarchy To Overseas Expansion

Spanish companies' cost of financing at minimum lowsSpanish business centre in Madrid

The predictions of the IMF and other international organisations about the growth and the stability of Spain’s economy are being refuted by the facts. GDP growth has doubled and the current account balance has turned all the forecasts upside down, going from negative to positive.

What was traditionally always a need for financingthe difference between income and payments – compared with the rest of the world has become a capacity for financing. And in the last 12 months until September this was no less than 23 billion euros. The dynamism of exports of goods and services, in particular tourism, is behind this improvement which offsets and beats the recent rise in imports. There has been a very close correlation between this and the evolution of GDP.

In the month of September, exports registered an annual increase of 8.5%, rising 9.1% in the period January-September 2017. In the last 12 months, Spanish exports were 43.5% higher than in 2008, the last year of the previous expansionary economic cycle. An outright record. On the other hand, the level of imports has hardly varied, with a rise of 1.04%. The close dependence between growth in productivity and imports may be a thing of thing of the past. We will need to keep an eye on this. What is not in doubt is that the national productive structure is more competitive not just overseas but also in the domestic market. Our main overseas market is the EU: the imbalance between what we sold to Europe and what we bought from it (structural and cohesion funds mitigating this) is now reversed. Between January and September 2017, there was a surplus with the EU of 13.3 billion euros (10 billion in 2016). France is our first client, then comes Germany and, quite a bit farther down, Italy, Portugal and the UK.

What has been instrumental in this correction is, firstly, the line of machinery and capital goods. Then comes food, which for the first time has beaten automotive exports. Plastics from the Almeria region  partly explain the year-on-year rise of 20.2% in exports in Andalucia, now the second biggest exporting region in Spain, ahead even of Madrid, and only beaten by Catalonia…Spanish companies without any subsidies or bailouts have turned themselves around and transformed the former autarchy into a country decidely open to the overseas market. The euro and the Single Market have also contributed a lot to this change. They have created these objective conditions to eliminate any preference between interior and exterior. Whatsmore, there are also those favourable tailwinds: oil prices and low interest rates. But there is a recent and resilient headwind: the trade deficit with Asia of 26.8 billion euros between January and September, exceeding the total trade deficit of 18.6 billion. It’s not sufficient for us with our surplus with the EU. China is the main country responsable. Its trade surplus with Spain in the nine months to September stood at 15 billion euros and represents 8.6% of total imports, only exceeded by Germany and France. We would have to sell a lot of hams to balance this out. The Chinese and our exporters, each doing their own thing: the State, just a spectator.


About the Author

Luis Alcaide
Luis Alcaide works as an economist for the Spanish government since 1961. He has been state adviser in the European Union and Bank of Spain director of communications. Alcaide published editorial articles in Spain's leading newspaper El País between 1977 and 1983, and in Diario 16 between 1985 and 1988. He regularly contributes to Economía Exterior and Política Exterior. He's founder member of Grupo Consejeros.