Economy of Spain

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Economy of Spain
Currency	1 Euro = 100 eurocent
Fiscal year	Calendar year
Trade organizations	EU, WTO and OECD
Statistics
GDP	1.378 trillion (2008 est.)
GDP growth	1.3% (2008 est.)
GDP per capita	$34,600 (2008 est.)
GDP by sector	agriculture (3.6%), industry (28.9%), services (67.5%) (2008 est.)
Inflation (CPI)	1.4% (2008 est.)
Population below poverty line	19.8% (2005)
Gini index	32% (2005)
Labour force	23.1 million (2008 est.)
Labour force by occupation	services (64.6%), manufacturing, mining and construction (30.1%), agriculture (5.3%) (2005 est.)
Unemployment	13.9% (2008 est.)
Main industries	Tourism, textiles and apparel (including footwear), food and beverages, metals and metal manufactures, chemicals, shipbuilding, automobiles, machine tools.
External
Exports	$292.8 billion F.O.B. (2008 est.)
Export goods	Machinery, motor vehicles, foodstuffs, pharmaceuticals and medicines, other consumer goods
Main export partners	France 18.8%, Germany 10.8%, Portugal 8.6%, Italy 8.5%, UK 7.6% U.S. 4.2% (2007)
Imports	$444.9 billion (2008 est.)
Import goods	Machinery and equipment, fuels, chemicals, semifinished goods, foodstuffs, consumer goods, measuring and medical control instruments
Main import partners	Germany 15.7%, France 12.7%, Italy 8.4%, China 5.8%, UK 4.8%, Netherlands 4.6% (2007)
Public finances
Public Debt	37.5% GDP (2008) or $516.75 billion
Revenues	$443.3 billion (2008 est.)
Expenses	$535.6 billion (2008 est.)
Economic aid	$1.33 billion (donor) (1999)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars
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The economy of Spain is the fifth largest in the European Union and the twelfth largest in the world, as measured by total gross domestic product (purchasing power parity).^[1]

The Spanish economy experienced a long and remarkable period of steady solid growth since the early 1980s, interrupted briefly by the early 1990s recession. This trend has again been interrupted, by the 2008 financial crisis.

Contents 1 Transition to a modern economy 2 1992 to the present 2.1 Convergence with the European Union 2.2 Current events: a downward scenario 3 Internationalization 4 Statistics 5 References and notes 6 See also 7 External links 7.1 Statistical resources 7.2 Further reading

[edit] Transition to a modern economy

What is now the 12th largest economy in the world has evolved from the regulated economy of Francoism as the latter started to fade out in 1975.^[2]

Starting with the "Stabilization Plan" of 1959, Franco's regime initiated a set of deregulating moves away from its initial total control of the economy; these, along with large infrastructure projects and a gradual opening to tourism, resulted in the paramount economic growth almost overnight which came to be known as the "Spanish Miracle".

However, by Franco's death and the dawn of the constitutional monarchy, interventionism was still widespread: basic products like bread and sugar had their prices fixed by the government, large public firms controlled all sectors regarded as strategic (Telephone, tobacco, petrol, etc.), shops had fixed opening and closing times (although this also occurred in other European countries such as Germany), both passive and active interest rates were fixed by the government, etc. All these rigidities and more were made obvious by the 1973 oil crisis, which terminated the previous expansion cycle and unleashed a period of severe industrial crisis which lasted approximately a decade (1975-1985). This blow stressed the need to modernize the economy and join the European Community.

Spain's accession to the European Community, now European Union (EU), in January 1986 ushered the country into opening its economy, modernize its industrial base and revise economic legislation. The EU, with amounts of funds from the European Regional Development Fund- Spain greatly improved infrastructures, increased GDP growth, reduced the public debt to GDP ratio, reduced unemployment from 23% to 10%, and reduced inflation to under 3%.

[edit] 1992 to the present

Following peak growth years in the late 1980s, in 1992 the Spanish economy was finally touched by the early 1990s recession; this happened, tellingly, in the year when the Barcelona Olympics were held and all the construction investment and feasts were finished. The economy, however, recovered during the first Aznar administration (1996-2000), driven by a return of consumer confidence and increased private consumption. Unemployment at 7.6% (October 2006), represented a significant improvement from the 1980s levels and a better rate than the one of Germany or France. Devaluations of the peseta during the 1990s made Spanish exports more competitive.

In 1999 Spain was amongst the leading group within the EU to adopt the Euro as their accounting money in preparation for its launching as a physical currency, which happened on January 1, 2002. On that date Spain terminated its historic peseta currency and replaced it with the euro, which has become its national currency shared with 16 (Slovakia was made the 16th on January 1, 2009) other countries from the Eurozone. This culminated a fast process of economic modernization even though the strength of the euro since its adoption has raised recent concerns that Spanish exports outside the European Union are being priced out of the range of foreign buyers. However, this has been offset by the facilitation of trade among the euro nations.

The Spanish economy was credited for having avoided the virtual zero growth rate of some of its largest partners in the EU (namely France, Germany and Italy) in the late 90's and at the beginning of the 21st century in a process which started with former Prime Minister Aznar's liberalization and deregulation reforms aiming to reduce the State's role in the market place. In 1995 Spain started an impressive economic cycle marked by an outstanding economic growth, with figures around 3%, often well over this rate.^[3] In 2008, however, bursting of a housing bubble led to a precipitous drop in growth, to under 2%.^[4]

Growth in the decade prior to 2008 steadily closed the economic gap between Spain and its leading partners in the EU. Hence, the Spanish economy was regarded as one of the most dynamic within the EU, even able to replace the leading role of much larger economies like the ones of France and Germany, thus subsequently attracting significant amounts of native and foreign investment.^[5] Also, during the period spanning from the mid 1980s through the mid 2000s, Spain was second only to France in being the most successful OECD country in terms of reduced income inequality over this period.^[6] Spain also made great strides in integrating women into the workforce. From a position where the role of Spanish women in the labour market in the early 1970s was similar to that prevailing in the major European countries in the 1930s, by the 1990s Spain had achieved a modern European profile in terms of economic participation by women.^[7]

[edit] Convergence with the European Union

Due to its own economic development and the recent EU enlargements up to 27 members (2007), Spain as a whole exceeded (105%) the average of the EU GDP in 2006 placing it ahead of Italy (103% for 2006). As for the extremes within Spain, three regions in 2005 were included in the leading EU group exceeding 125% of the GDP average level (Madrid, Navarre and the Basque Autonomous Community) and one was at the 85% level (Extremadura).^[8] According to the growth rates post 2006, noticeable progress from these figures happened until early 2008, when the Spanish economy was heavily affected by the international economic blow.^[4]

In this regard, according to Eurostat's early estimates for 2007 GDP per capita for the EU-27. Spain happened to stay at 107% of the level, well above Italy who was still above the average (101%), and catching up with countries like France (111%).^[9]

[edit] Current events: a downward scenario

Spain continued the path of economic growth when the ruling party changed in 2004, keeping robust GDP growth during the first term of prime minister José Luis Rodríguez Zapatero, even though some fundamental problems in the Spanish economy were self-evident. Among these, according to the Financial Times, there was Spain's huge trade deficit (which reached a staggering 10% of the country's GDP by the summer of 2008),^[10] the "loss of competitiveness against its main trading partners" and, also, as a part of the latter, an inflation rate which had been traditionally higher than the one of its European partners, back then especially affected by house price increases of 150% from 1998 and a growing family indebtedness (115%) chiefly related to the Spanish Real Estate boom and rocketing oil prices.^[11]

As Spain entered the second term of prime minister Rodríguez Zapatero, it has been seriously hit by the world liquidity crisis stemming from the credit crunch of 2008 which became evident in Spain by April 2008. The new situation faced by the Western economies is predating on Spain chiefly by means of the burst of the Spanish property bubble, which accounted for a rapidly increasing proportion of economic growth from 1997, peaking in 2004-2007. The property bubble was fed by low interest rates and the arrival of great numbers of immigrants. As a result, the end of the boom saw the rate of new residential construction almost halved in less than a year, property values declining, rising bankruptcies and soaring unemployment.

During the first quarter of 2008 the Spanish economy grew less than the EU major economies (namely Germany) for the first time in a decade. The outcome of this slower pace was that of effective reduced convergence with the bigger European economies, in contrast with the gains in convergence of the last decade.

The Spanish government official GDP growth forecast for 2008 in April was 2,3%. This figure was successively revised by the Spanish Ministry of Economy down to 1.6.^[12] Currently most independent forecasters estimate rates around 0.8% instead,^[13] far below the outstanding 3% or higher average GDP growth during the 1997-2007 decade.

In 2008, GDP growth was a mere 0.1% in the second quarter, but still better than other EU-economies which had contractions like Germany which had -0.5% or France or Italy, which got both a -0.3%,^[14] but this relative strength was more apparent than real. The true extent of the slowdown is revealed by the reversal of per capita GDP, which show a substantially worse condition than what the total national GDP figures seem to show (the national GDP figures are giving a misleading indication due to a surging population). Moreover the context was bad, with the EU economy as a whole contracting, and other countries with property bubbles –like Denmark and Ireland– entering recession. Then, during the third quarter of 2008 even the national GDP contracted for the first time in 15 years and, in February 2009, it was confirmed that Spain, along other European economies, had officially entered recession.^[15]

Due to the lack of own resources, Spain has to import all of its fossil fuels, which in an scenario of record prices added much pressure to the inflation rate. Thus, in June 2008 the inflation rate reached a 13 years high of 5.00%. Then, with the dramatic decrease of oil prices that happened in the second half of 2008 plus the confirmed burst of the property bubble, concerns quickly shifted to the risk of deflation instead, as Spain registered in January 2009 its lowest inflation rate in 40 years which was then followed in March 2009 by a negative inflation rate for the first time ever since this statistic is recorded.^[16][17]

The Spanish banking system has been credited as one of the most solid and best equipped among all Western economies to cope with the worldwide liquidity crisis, thanks to the heavily enforced conservative Spanish banking rules and practices. Banks are required to have high capital provisions and demand various proofs and securities from intending borrowers.^[18]

As for the employment, after having completed substantial improvements over the second half of the 1990s and during the 2000s which put a few regions on the brink of full employment, Spain suffered a severe setback in October 2008 when it saw its unemployment rate surging to 1996 levels. During the period October 2007-October 2008 Spain saw had its unemployment rate climbing 37%, exceeding by far the unemployment surge of past economis crisis like 1993's. In particular, during this particular month of October 2008, Spain suffered its worse unemployment rise ever recorded and,^[19] so far, the country is suffering Europe's biggest unemployment crisis.^[20] Thus, Spain's unemployment rate hit 17.4% at the end of March, with the jobless total now having doubled over the past 12 months, when two million people lost their jobs.^[21] In this same month, Spain for the first time in her history had over 4,000,000 people unemployed,^[22] an especially shocking figure even for a country which has become used to grim unemployment data.^[21] Although rapidly slowing, large scale immigration continued throughout 2008 despite the severe unemployment crisis, thereby worsening an already grave situation.^[23] There are now indications that established immigrants have begun to leave in large numbers, although many that have are still retaining a household in Spain due to the poor conditions that exist in their country of origin.^[24]

[edit] Internationalization

Ever since the 1990s some Spanish companies have gained multinational status, often, but not only, expanding their activities in culturally close Latin America, where Spain is the second biggest foreign investor after the United States.^[25]

Some of these companies lead in various international scenarios, such as Telefónica (telecom and media), Inditex (retail, owner of brands like Zara), Banco Santander and BBVA (banking), Gamesa (renewable energies), Indra Sistemas (IT and defence), Pescanova (fisheries) or Repsol YPF (oil refinery).

Spanish companies lead fields like renewable energy (Iberdrola is the world's largest renewable energy operator^[26]) and infrastructure, with six of the ten biggest international construction firms specialising in transport being Spanish, like Ferrovial, ACS, OHL or FCC.^[27]

[edit] Statistics

GDP: purchasing power parity - $1.358 trillion (2007)

GDP - real growth rate: 0.8% (2008)

GDP - per capita: purchasing power parity - $33,221 (2007)

GDP - composition by sector:
industry: 30.1%
services: 66.5% (2003 est.) One of the main services served is tourism; Spain is the second country in the world in the ranking of both tourist arrivals and incomes from tourism, having received in 2006 alone 58.5 million tourists and 51.1 billion dollars respectively^[28]
agriculture: 3.4%

Population below poverty line: 19.8% (2005 est.)^[29]

Household income or consumption by percentage share:
lowest 10%: 2.8%
highest 10%: 25.2% (1990)

Inflation rate (consumer prices): 0%.1 (jan 2009)

Labor force: 18.5 million (2006)

Labor force - by occupation: services 64%, manufacturing, mining, and construction 29%, agriculture 7% (2001est.)

Unemployment rate: 14.4% February 2009

Budget:
revenues: $105 billion
expenditures: $109 billion, including capital expenditures of $12.8 billion (2000 est.)

Industries: metals and metal manufactures, textiles and apparel (including footwear), food and beverages, chemicals, shipbuilding, electronic devices, automobiles, machine tools, tourism.

Industrial production growth rate: 0.6% (2003 est.)

Electricity - production: 222,500 GWh (2001)

Electricity - production by source:
fossil fuel: 50.4%
nuclear: 27.2%
hydro: 18.2%
other: 4.1% (2001)

Electricity - consumption: 210,400 GWh (2001)

Electricity - exports: 4,138 GWh (2001)

Electricity - imports: 7,588 GWh (2001)

Agriculture - products: grain, vegetables, olives, wine grapes, sugar beets, citrus; beef, pork, poultry, dairy products; fish

Exports: $192.5 billion f.o.b. (2006 est.)

Exports - commodities: machinery, motor vehicles; chemicals, electronic devices, foodstuffs, other consumer goods

Exports - partners: France 19%, Germany 11.4%, UK 9.6%, Portugal 9.5%, Italy 9.3%, United States 4.6% (2002)

Imports: $289.8 billion f.o.b. (2006 est.)

Imports - commodities: fuels, chemicals, machinery and equipment, semifinished goods; foodstuffs, consumer goods (1997)

Imports - partners: France 17%, Germany 16.5%, Italy 8.6%, UK 6.4%, Netherlands 4.8% (2002)

Debt - external: N.A.

Economic aid - donor: ODA, $1.33 billion (1999)

Currency: 1 euro (€) = 100 cents Exchange rates: euros per US dollar - 0.67 (2008), 0.83 (2006), 0.82 (2005), 0.81 (2004), 0.89 (2003), 1.06 (2002), 1.12 (2001), 1.09 (2000), 0.94 (1999)

Fiscal year: calendar year

[edit] References and notes

15. OECD http://stats.oecd.org/wbos/Index.aspx?QueryId=480

[edit] See also

• Banco de España
• Economic history of Spain
• Economy of Europe

[edit] External links

[edit] Statistical resources

• Banco de España (Spanish Central Bank); features the latest and in depth statistics
• Statistical Institute of Andalusia
• National Institute of Statistics
• Statistical Institute of Catalonia
• Statistical Institute of Galicia
• OECD's Spain country Web site and OECD Economic Survey of Spain

[edit] Further reading

• Article: Investing in Spain by Nicholas Vardy - September, 2006. A global investor's discussion of Spain's economic boom.
• The Pain in Spain: On May Day, Nearly 1 in 5 are Jobless by Andrés Cala, The Christian Science Monitor, May 1, 2009
• O'Neill, Michael F.; McGettigan, Gerard (15 August 2005), "Spanish biotechnology: anyone for PYMEs?", Drug Discovery Today, News and Comment (London: Elsevier) 10 (16): 1078–1081, doi:10.1016/S1359-6446(05)03549-X, ISSN 1359-6446 

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