Economy of Spain
Encyclopedia
The economy of Spain is the twelfth-largest economy in the world, based on nominal GDP comparisons, and the fifth-largest in Europe. It is regarded as the world's 20th most developed country.
Until 2008 the economy
of Spain
had been regarded as one of the most dynamic within the EU, attracting significant amounts of foreign investment. Spain's economy had been credited with having avoided the virtual zero growth rate of some of its largest partners in the EU. In fact, the country's economy had created more than half of all the new jobs in the European Union over the five years ending 2005. In 2011 this process was rapidly being reversed.
, with construction representing an astonishing 16% of GDP and 12% of employment in its final year. According to calculations by the German newspaper Die Welt
, Spain had been on course to overtake countries like Germany in per capita income by 2011. However, the downside of the defunct real estate boom was a corresponding rise in the levels of personal debt; as prospective homeowners had struggled to meet asking prices, the average level of household debt tripled in less than a decade. This placed especially great pressure upon lower to middle income groups; by 2005 the median ratio of indebtedness to income had grown to 125%, due primarily to expensive boom time mortgages that now often exceed the value of the property.
A European Commission forecast had predicted Spain would enter a recession
by the end of 2008. According to Spain’s Economy Minister, “Spain faces its deepest recession in half a century”. Spain's government forecast the unemployment
rate would rise to 16% in 2009. The ESADE
business school predicted 20%.
Due to its own economic development and the recent EU enlargements up to 28 members (2007), Spain had a GDP per capita of (105%) of EU average per capita GDP in 2006, which placed it slightly ahead of Italy (103%). As for the extremes within Spain, three regions in 2005 were included in the leading EU group exceeding 125% of the GDP per capita average level:
Basque Autonomous Community
leading with Madrid and Navarre
, and one was at the 85% level (Extremadura
.
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 puncturing of its property bubble by the global financial crisis.
The centre-right government of former prime minister José María Aznar
had worked successfully to gain admission to the group of countries launching the euro
in 1999. Unemployment
stood at 7.6% in October 2006, a rate that compared favorably to many other European countries, and especially with the early 1990s when it stood at over 20%. Perennial weak points of Spain's economy include high inflation, a large underground economy
, and an education system which OECD reports place among the poorest for developed countries. However, the property bubble that had begun building from 1997, fed by historically low interest rates and an immense surge in immigration, imploded in 2008, leading to a rapidly weakening economy and soaring unemployment. By the end of 2010 unemployment had reached 20.33 (over 28% in Andalucia and the Canaries).
, even though some fundamental problems in the Spanish economy were now becoming clearly evident. Among these, according to the Financial Times
, was Spain's rapidly growing trade deficit
, which had reached a staggering 10% of the country's GDP by the summer of 2008, 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.
The Spanish government official GDP growth forecast for 2008 in April was 2,3%. This figure was successively revised down by the Spanish Ministry of Economy to 1.6. This figure looked better than those of most other developed countries. In reality, this rate effectively represented stagnant GDP per person due to Spain's high population growth, itself the result of a high rate of immigration. Retrospective studies by most independent forecasters estimate that the rate had actually dropped to 0.8% instead, far below the strong 3% plus GDP annual growth rates during the 1997-2007 decade. Then, during the third quarter of 2008 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
.
In July 2009, the IMF worsened the estimates for Spain's 2009 contraction, to minus 4% of GDP for the year (close to the European average of minus 4.6%), besides, it estimated a further 0.8% contraction of the Spanish economy for 2010, the worst prospect amid advanced economies. The estimation of the IMF was proven to be somewhat too pessimistic, as Spain's GDP sank less than that of most advanced economies in 2009 and by the first quarter of 2010 had already emerged from the recession.
In 2008 the total Spanish public debt (government debt) relative to the total GDP was well below the European Union average, and in fact the government budget was in surplus, but the financial situation rapidly deteriorated with the onset of the recession.
and to demand various guarantees and securities from intending borrowers. This has allowed the banks, particularly the geographically and industrially diversified large banks like BBVA and Santander, to weather the real estate deflation better than expected. Indeed, these banks have been able to capitalise on their strong position to buy up distressed banking assets elsewhere in Europe and in the United States.
Nevertheless, with the unprecedented deepening of the country's housing crisis, smaller local savings banks
("caja") are known to have delayed the registering of bad loans, especially those backed by houses and land, to avoid declaring losses. This has occurred despite the fact that these credits are backed by the borrower's present and future assets.
CCM (Caja Castilla la Mancha), is still the only local savings bank to have suffered a run by depositors. The central bank
Banco de España (equivalent of the US Federal Reserve) forcibly took over CCM to prevent its financial collapse.
PricewaterhouseCoopers estimated an imbalance between CCM's assets and debts of €3,500 million, not counting the industrial corporation. One of the investment mistakes this bank had indulged in during the height of the property boom was the funding of the airport Ciudad Real Central Airport at Ciudad Real
. It turned out that no airline wanted to operate from there, resulting in a financial fiasco (as well as wasting a lot of land and ruining vistas). There were still further errors leading to the present situation. On May 22, 2010, the Banco de España took over another "caja", CajaSur, as part of a national program to put the country's smaller banks on a firm financial basis.
--72.209.132.114 (talk) 21:43, 27 November 2011 (UTC)--72.209.132.114 (talk) 21:43, 27 November 2011 (UTC)
Many economists recommended a battery of policies to control the surging public debt caused by the recessionary collapse of tax revenues, combining drastic austerity measures with higher taxes. Some senior German policy makers went as far as to say that emergency bailouts should include harsh penalties to EU aid recipients such as Greece. It has been noted that the Spanish government budget was in surplus in the years immediately before the GFC and that its debt was not considered excessive.
At the beginning of 2010, Spain's public debt as a percentage of GDP was still less than those of Britain, France or Germany. However, commentators pointed out that Spain's recovery was fragile, that the public debt was growing quickly, that troubled regional banks may need large bailouts, growth prospects were poor and therefore limiting revenue and that the central government has limited control over the spending of the regional governments. Under the structure of shared governmental responsibilities that has evolved since 1975, much responsibility for spending had been given back to the regions. The central government found itself in the difficult position of trying to gain support for unpopular spending cuts from the recalcitrant regional governments.
On May 23, 2010, the government announced further austerity measures, consolidating the ambitious plans announced in January.
As of September 2011, Spanish banks hold a record high of 142 billion Euros of Spanish national bonds. December 2011 bond auctions are "very likely to be covered" according to JPMorgan Chase.
, Spain suffered a severe setback from October 2008, when it saw its unemployment rate surging to 1996 levels. During the period October 2007-October 2008 Spain had its unemployment rate climbing 37%, exceeding by far the unemployment surge of past economic crises like 1993. In particular, during the month of October 2008, Spain feared its worst unemployment rise ever recorded and, so far, the country is suffering Europe's biggest unemployment crisis. By July 2009, it had shed 1.2 million jobs in one year and was to have the same number of jobless as France
and Italy
combined. Spain's unemployment rate hit 17.4% at the end of March, with the jobless total having doubled over the previous 12 months, when two million people lost their jobs; with the oversized building and housing related industries contributing greatly to the rising unemployment numbers. In this same month, Spain for the first time in its history had over 4,000,000 people unemployed, an especially shocking figure even for a country which had become used to grim unemployment data. Although rapidly slowing, immigration continued throughout 2008 despite the escalating unemployment crisis, worsening the situation. In 2009 some established immigrants began to leave, although many that did continued to maintain homes in Spain due to poor conditions in their country of origin.
Some critics say the Spanish labor market is too rigid, preventing employers from removing unproductive employees and putting upward pressure on unemployment as employers are wary of taking risks on new hires.
s. In a scenario of record prices this means adding much pressure to the inflation rate. In June 2008 the inflation rate reached a 13-year high at 5.00%. Then, with the dramatic decrease of oil prices that took place in the second half of 2008 plus the manifest bursting of the real estate bubble, concerns quickly shifted over to the risk of deflation, as Spain recorded in January 2009 its lowest inflation rate in 40 years, followed shortly afterwards, in March 2009 by a negative inflation rate for the first time since the gathering of these statistics started.
The Comisión Nacional de la Energía (National Energy Commission) is the regulatory body for energy systems, created by Law 34/1998, of 7 October of the Hydrocarbons Sector, and developed by Royal Decree 1339/1999, of 31 July, which approved its regulations. The National Energy Commission has been assigned to the Ministry of Industry, Tourism And Trade.
Since the 1990s some Spanish companies have gained multinational status, often expanding their activities in culturally close Latin America
. Spain is the second biggest foreign investor there, after the United States
. Spanish companies too have expanded into Asia, especially China. This early global expansion is a competitive vantage over its competitors and European neighbors. The reason may primarily due to the booming interest toward Spanish language and culture in Asia, but also a corporate culture that learned to take risks in unstable markets.
Spanish companies lead fields like renewable energy
(Iberdrola
is the world's largest renewable energy operator), technology companies like Telefónica
, Abengoa
, Movistar
, Gamesa
, Indra
, train manufacturers like CAF
, Talgo
, petroleum companies like Repsol and infrastructure, with six of the ten biggest international construction firms specialising in transport being Spanish, like Ferrovial
, Acciona
, ACS
, OHL
and FCC
.
The year 2011, Spain is among the countries with overall export growth, according to OECD forecasts. The international institution puts Spain in fifth place in the ranking, with estimated exports of goods and services 9.9%. Spain is placed after Germany and Slovakia, which will increase its sales abroad by 10.4%.
Apart from its domestic brand SEAT
, which is the major contributor to the automotive sector of the country, and Santana Motor, many suppliers and foreign car and truck makers - like Volkswagen
, Nissan, Daimler Mercedes-Benz, Ford, Renault
, GM/Opel
, PSA Peugeot/Citroën
, Iveco
, Chery
etc. - have facilities and plants in Spain today developing and producing vehicles and components, not only for the needs of the internal market but also for exportation purposes, with the contribution of the automobile industry in 2008 rising up to the second place with 17,6% out of the country's total exports.
Until 2008 the economy
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
of Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
had been regarded as one of the most dynamic within the EU, attracting significant amounts of foreign investment. Spain's economy had been credited with having avoided the virtual zero growth rate of some of its largest partners in the EU. In fact, the country's economy had created more than half of all the new jobs in the European Union over the five years ending 2005. In 2011 this process was rapidly being reversed.
Recent developments
More recently, the Spanish economy had benefited greatly from the global real estate boomReal estate bubble
A real estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets...
, with construction representing an astonishing 16% of GDP and 12% of employment in its final year. According to calculations by the German newspaper Die Welt
Die Welt
Die Welt is a German national daily newspaper published by the Axel Springer AG company.It was founded in Hamburg in 1946 by the British occupying forces, aiming to provide a "quality newspaper" modelled on The Times...
, Spain had been on course to overtake countries like Germany in per capita income by 2011. However, the downside of the defunct real estate boom was a corresponding rise in the levels of personal debt; as prospective homeowners had struggled to meet asking prices, the average level of household debt tripled in less than a decade. This placed especially great pressure upon lower to middle income groups; by 2005 the median ratio of indebtedness to income had grown to 125%, due primarily to expensive boom time mortgages that now often exceed the value of the property.
A European Commission forecast had predicted Spain would enter a recession
Late 2000s recession
The late-2000s recession, sometimes referred to as the Great Recession or Lesser Depression or Long Recession, is a severe ongoing global economic problem that began in December 2007 and took a particularly sharp downward turn in September 2008. The Great Recession has affected the entire world...
by the end of 2008. According to Spain’s Economy Minister, “Spain faces its deepest recession in half a century”. Spain's government forecast the unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
rate would rise to 16% in 2009. The ESADE
ESADE
The Escuela Superior de Administración y Dirección de Empresas is a college associated with the Ramon Llull University located in Barcelona, Spain. ESADE is composed of three departments; the ESADE Business School, the ESADE Executive Language Center and the ESADE Law School...
business school predicted 20%.
Due to its own economic development and the recent EU enlargements up to 28 members (2007), Spain had a GDP per capita of (105%) of EU average per capita GDP in 2006, which placed it slightly ahead of Italy (103%). As for the extremes within Spain, three regions in 2005 were included in the leading EU group exceeding 125% of the GDP per capita average level:
Basque Autonomous Community
Basque Country (autonomous community)
The Basque Country is an autonomous community of northern Spain. It includes the Basque provinces of Álava, Biscay and Gipuzkoa, also called Historical Territories....
leading with Madrid and Navarre
Navarre
Navarre , officially the Chartered Community of Navarre is an autonomous community in northern Spain, bordering the Basque Country, La Rioja, and Aragon in Spain and Aquitaine in France...
, and one was at the 85% level (Extremadura
Extremadura
Extremadura is an autonomous community of western Spain whose capital city is Mérida. Its component provinces are Cáceres and Badajoz. It is bordered by Portugal to the west...
.
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 puncturing of its property bubble by the global financial crisis.
The centre-right government of former prime minister José María Aznar
José María Aznar
José María Alfredo Aznar López served as the Prime Minister of Spain from 1996 to 2004. He is on the board of directors of News Corporation.-Early life:...
had worked successfully to gain admission to the group of countries launching the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
in 1999. Unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
stood at 7.6% in October 2006, a rate that compared favorably to many other European countries, and especially with the early 1990s when it stood at over 20%. Perennial weak points of Spain's economy include high inflation, a large underground economy
Underground economy
A black market or underground economy is a market in goods or services which operates outside the formal one supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and...
, and an education system which OECD reports place among the poorest for developed countries. However, the property bubble that had begun building from 1997, fed by historically low interest rates and an immense surge in immigration, imploded in 2008, leading to a rapidly weakening economy and soaring unemployment. By the end of 2010 unemployment had reached 20.33 (over 28% in Andalucia and the Canaries).
Growing reduction of European Union funds
Capital contributions from the EU, which contributed significantly to economic empowerment Spanish since joining the EEC, decreased considerably in recent 20 years due to economic standardization in relation to other countries and the effects of EU enlargement. On the one hand, agricultural funds the Common Agricultural Policy of the European Union (CAP) is spread across more countries (the Eastern Europe countries have a significant agricultural sector), on the other, the structural and cohesion funds have declined inevitably due to the Spanish economic success (since their income has progressed strongly in absolute terms) and due to the incorporation of less developed countries, lowers the average income per capita (or GDP per capita), so that Spanish regions relatively less developed, have come to be in the European average or even above it. Spain gradually becomes net contributor of funds for less developed countries of the Union.2008–2009 financial crisis
Spain continued on the path of economic growth when the ruling party changed in 2004, maintaining robust GDP growth during the first term of prime minister José Luis Rodríguez ZapateroJosé Luis Rodríguez Zapatero
José Luis Rodríguez Zapatero is a member of the Spanish Socialist Workers' Party . He was elected for two terms as Prime Minister of Spain, in the 2004 and 2008 general elections. On 2 April 2011 he announced he will not stand for re-election in 2012...
, even though some fundamental problems in the Spanish economy were now becoming clearly evident. Among these, according to the Financial Times
Financial Times
The Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
, was Spain's rapidly growing trade deficit
Balance of trade
The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
, which had reached a staggering 10% of the country's GDP by the summer of 2008, the "loss of competitiveness
Competitiveness
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market...
against its main trading partners" and, also, as a part of the latter, an inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
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
Spanish property bubble
The Spanish property bubble refers to the massive growth of real state prices observed, in various stages, from 1985 up to 2008 in Spain. The housing burst can be clearly divided in three periods: 1985-1991, in which the price nearly tripled, 1992-1996, in which the price remained somewhat stable,...
and rocketing oil prices.
The Spanish government official GDP growth forecast for 2008 in April was 2,3%. This figure was successively revised down by the Spanish Ministry of Economy to 1.6. This figure looked better than those of most other developed countries. In reality, this rate effectively represented stagnant GDP per person due to Spain's high population growth, itself the result of a high rate of immigration. Retrospective studies by most independent forecasters estimate that the rate had actually dropped to 0.8% instead, far below the strong 3% plus GDP annual growth rates during the 1997-2007 decade. Then, during the third quarter of 2008 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
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
.
In July 2009, the IMF worsened the estimates for Spain's 2009 contraction, to minus 4% of GDP for the year (close to the European average of minus 4.6%), besides, it estimated a further 0.8% contraction of the Spanish economy for 2010, the worst prospect amid advanced economies. The estimation of the IMF was proven to be somewhat too pessimistic, as Spain's GDP sank less than that of most advanced economies in 2009 and by the first quarter of 2010 had already emerged from the recession.
In 2008 the total Spanish public debt (government debt) relative to the total GDP was well below the European Union average, and in fact the government budget was in surplus, but the financial situation rapidly deteriorated with the onset of the recession.
Spanish banking system
The Spanish banking system has been credited as one of the most solid of all western banking systems in coping with the ongoing worldwide liquidity crisis, thanks to the country's conservative banking rules and practices. Banks are required to have high capital provisionsCapital requirement
Capital requirement refers to -The standardized requirements in place for banks and other depository institutions, which determines how much capital is required to be held for a certain level of assets through regulatory agencies such as the Bank for International Settlements, Federal Deposit...
and to demand various guarantees and securities from intending borrowers. This has allowed the banks, particularly the geographically and industrially diversified large banks like BBVA and Santander, to weather the real estate deflation better than expected. Indeed, these banks have been able to capitalise on their strong position to buy up distressed banking assets elsewhere in Europe and in the United States.
Nevertheless, with the unprecedented deepening of the country's housing crisis, smaller local savings banks
Savings bank (Spain)
In Spain, a savings bank is a financial institution which specializes in accepting savings deposits and granting loans. Their original aim was to create the habit of thrift amongst the very poor but they have evolved to compete with and rival commercial banks.Their trade association is the Spanish...
("caja") are known to have delayed the registering of bad loans, especially those backed by houses and land, to avoid declaring losses. This has occurred despite the fact that these credits are backed by the borrower's present and future assets.
CCM (Caja Castilla la Mancha), is still the only local savings bank to have suffered a run by depositors. The central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
Banco de España (equivalent of the US Federal Reserve) forcibly took over CCM to prevent its financial collapse.
PricewaterhouseCoopers estimated an imbalance between CCM's assets and debts of €3,500 million, not counting the industrial corporation. One of the investment mistakes this bank had indulged in during the height of the property boom was the funding of the airport Ciudad Real Central Airport at Ciudad Real
Ciudad Real
Ciudad Real is a city in Castile-La Mancha, Spain, with a population of c. 74,000. It is the capital of the province of Ciudad Real. It has a stop on the AVE high-speed rail line and has begun to grow as a long-distance commuter suburb of Madrid, located 115 miles to the north. A high capacity...
. It turned out that no airline wanted to operate from there, resulting in a financial fiasco (as well as wasting a lot of land and ruining vistas). There were still further errors leading to the present situation. On May 22, 2010, the Banco de España took over another "caja", CajaSur, as part of a national program to put the country's smaller banks on a firm financial basis.
--72.209.132.114 (talk) 21:43, 27 November 2011 (UTC)--72.209.132.114 (talk) 21:43, 27 November 2011 (UTC)
The 2010 Euro debt crisis
In the first weeks of 2010, renewed anxiety about the excessive levels of debt in some EU countries and, more generally, about the health of the euro has spread from Ireland and Greece to Portugal, and to a lesser extent in Spain and Italy.Many economists recommended a battery of policies to control the surging public debt caused by the recessionary collapse of tax revenues, combining drastic austerity measures with higher taxes. Some senior German policy makers went as far as to say that emergency bailouts should include harsh penalties to EU aid recipients such as Greece. It has been noted that the Spanish government budget was in surplus in the years immediately before the GFC and that its debt was not considered excessive.
At the beginning of 2010, Spain's public debt as a percentage of GDP was still less than those of Britain, France or Germany. However, commentators pointed out that Spain's recovery was fragile, that the public debt was growing quickly, that troubled regional banks may need large bailouts, growth prospects were poor and therefore limiting revenue and that the central government has limited control over the spending of the regional governments. Under the structure of shared governmental responsibilities that has evolved since 1975, much responsibility for spending had been given back to the regions. The central government found itself in the difficult position of trying to gain support for unpopular spending cuts from the recalcitrant regional governments.
On May 23, 2010, the government announced further austerity measures, consolidating the ambitious plans announced in January.
As of September 2011, Spanish banks hold a record high of 142 billion Euros of Spanish national bonds. December 2011 bond auctions are "very likely to be covered" according to JPMorgan Chase.
Employment crisis
As for employment, a longtime weakness of the Spanish economy, after having completed large improvements over the second half of the 1990s and during the 2000s, which put a few regions on the brink of full employmentFull employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
, Spain suffered a severe setback from October 2008, when it saw its unemployment rate surging to 1996 levels. During the period October 2007-October 2008 Spain had its unemployment rate climbing 37%, exceeding by far the unemployment surge of past economic crises like 1993. In particular, during the month of October 2008, Spain feared its worst unemployment rise ever recorded and, so far, the country is suffering Europe's biggest unemployment crisis. By July 2009, it had shed 1.2 million jobs in one year and was to have the same number of jobless as France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
combined. Spain's unemployment rate hit 17.4% at the end of March, with the jobless total having doubled over the previous 12 months, when two million people lost their jobs; with the oversized building and housing related industries contributing greatly to the rising unemployment numbers. In this same month, Spain for the first time in its history had over 4,000,000 people unemployed, an especially shocking figure even for a country which had become used to grim unemployment data. Although rapidly slowing, immigration continued throughout 2008 despite the escalating unemployment crisis, worsening the situation. In 2009 some established immigrants began to leave, although many that did continued to maintain homes in Spain due to poor conditions in their country of origin.
Some critics say the Spanish labor market is too rigid, preventing employers from removing unproductive employees and putting upward pressure on unemployment as employers are wary of taking risks on new hires.
Prices
Due to the lack of own resources, Spain has to import all of its fossil fuelFossil fuel
Fossil fuels are fuels formed by natural processes such as anaerobic decomposition of buried dead organisms. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650 million years...
s. In a scenario of record prices this means adding much pressure to the inflation rate. In June 2008 the inflation rate reached a 13-year high at 5.00%. Then, with the dramatic decrease of oil prices that took place in the second half of 2008 plus the manifest bursting of the real estate bubble, concerns quickly shifted over to the risk of deflation, as Spain recorded in January 2009 its lowest inflation rate in 40 years, followed shortly afterwards, in March 2009 by a negative inflation rate for the first time since the gathering of these statistics started.
Energy
Economic ties
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
. Spain is the second biggest foreign investor there, after the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. Spanish companies too have expanded into Asia, especially China. This early global expansion is a competitive vantage over its competitors and European neighbors. The reason may primarily due to the booming interest toward Spanish language and culture in Asia, but also a corporate culture that learned to take risks in unstable markets.
Spanish companies lead fields like renewable energy
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
(Iberdrola
Iberdrola
Iberdrola , headquartered in Bilbao, is a private utility with a global footprint and over 150 years of experience...
is the world's largest renewable energy operator), technology companies like Telefónica
Telefónica
Telefónica, S.A. is a Spanish broadband and telecommunications provider in Europe and Latin America. Operating globally, it is the third largest provider in the world...
, Abengoa
Abengoa
Abengoa is a Spanish multinational corporation, which includes companies in the domains of energy, telecommunications, transportation, and the environment...
, Movistar
Movistar
Movistar is a major Spanish mobile phone operator owned by Telefónica Móviles. It operates in Spain and in many Latin American countries. It is the largest carrier in Spain with 22 million customers and 41.58% of market share. Its principal competitor in Latin America is America Movil...
, Gamesa
Gamesa
Gamesa is Mexico's largest manufacturer of cookies . The company also makes pasta, flour, ready to eat cereals and other related products. It is headquartered in San Pedro Garza García, Nuevo León, and have production facilities in eight states across Mexico and one in Colombia...
, Indra
Indra
' or is the King of the demi-gods or Devas and Lord of Heaven or Svargaloka in Hindu mythology. He is also the God of War, Storms, and Rainfall.Indra is one of the chief deities in the Rigveda...
, train manufacturers like CAF
CAF
CAF may refer to:Armed forces*Canadian Armed Forces , the Canadian Air Force, Army, and Navy*Canadian Air Force, now the Royal Canadian Air Force*Republic of China Air Force, the air force of the Republic of China...
, Talgo
Talgo
Talgo is a Spanish manufacturer of railway vehicles. It is best known for a design of articulated railway passenger cars in which the wheels are mounted in pairs, but not joined by an axle, and being between rather than underneath the individual coaches...
, petroleum companies like Repsol and infrastructure, with six of the ten biggest international construction firms specialising in transport being Spanish, like Ferrovial
Ferrovial
Ferrovial, S.A. is a Spanish multinational company involved in the design, build, financing, operation and maintenance of transport, urban and services infrastructure. It is a publicly-traded company and is part of the IBEX 35 market value-weighted stock market index...
, Acciona
Acciona
Acciona, S.A., is a Spanish conglomerate group dedicated to civil engineering, construction and infrastructure.The company was founded in 1997 through the merger of Entrecanales y Tavora and Cubiertas y MZOV. The company's headquarters is in Alcobendas, Community of Madrid, Spain. The company's U.S...
, ACS
Grupo ACS
Actividades de Construcción y Servicios, S.A. is a Spanish company dedicated to civil and engineering construction, all types services and telecommunications. It is one of the leading construction companies in the world, with projects in many countries around the world...
, OHL
Obrascón Huarte Lain
Obrascón Huarte Lain, S.A. is an Spanish-based multinational construction and civil engineering company. The company is involved in infrastructure and commercial property construction, as well as homebuilding and the operation of toll road and other transport concessions. In the latter, the group...
and FCC
Fomento de Construcciones y Contratas
Fomento de Construcciones y Contratas is a leading Spanish construction company based in Barcelona. It is publicly traded and is part of the IBEX 35.Over 50% of the shares are owned by a company controlled by Esther Koplowitz and others.-History:...
.
Exports grow steadily
With growth of 17.4% to 185.799 million euros in sales, the export sector has recovered to pre-crisis levels, according to data released by the Ministry of Industry. With a contribution of 1.1% to Gross Domestic Product (GDP), has brought stability to the Spanish economy. The improvement in exports including emerging countries, has allowed the trade deficit is not increased because of rising global energy prices.The year 2011, Spain is among the countries with overall export growth, according to OECD forecasts. The international institution puts Spain in fifth place in the ranking, with estimated exports of goods and services 9.9%. Spain is placed after Germany and Slovakia, which will increase its sales abroad by 10.4%.
Tourism
During the last four decades Spain's foreign tourist industry has grown into the second biggest in the world and was worth approximately 40 billion Euros, about 5% of GDP, in 2006. The total value of foreign and domestic tourism came to nearly 11% of the country's GDP and provided employment for about 2 million people.Automobile industry
The automobile industry in Spain is a large employer in the country, employing 9% of the total workforce in 2009 and contributing to 3.3% of the Spanish GDP, despite the decline due to the economic recession of the past couple of years. In 2009, Spain was in the top ten of the largest automobile producer countries in the world.Apart from its domestic brand SEAT
SEAT
SEAT, S.A. is a Spanish automobile manufacturer founded on May 9, 1950 by the Instituto Nacional de Industria , a state-owned industrial holding company....
, which is the major contributor to the automotive sector of the country, and Santana Motor, many suppliers and foreign car and truck makers - like Volkswagen
Volkswagen
Volkswagen is a German automobile manufacturer and is the original and biggest-selling marque of the Volkswagen Group, which now also owns the Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda marques and the truck manufacturer Scania.Volkswagen means "people's car" in German, where it is...
, Nissan, Daimler Mercedes-Benz, Ford, Renault
Renault
Renault S.A. is a French automaker producing cars, vans, and in the past, autorail vehicles, trucks, tractors, vans and also buses/coaches. Its alliance with Nissan makes it the world's third largest automaker...
, GM/Opel
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
, PSA Peugeot/Citroën
PSA Peugeot Citroën
PSA Peugeot Citroën is a French manufacturer of automobiles and motorcycles sold under the Peugeot and Citroën marques. Headquartered in the 16th arrondissement of Paris, PSA is the second largest automaker based in Europe and the number eight in the world.-History:In December 1974 Peugeot S.A....
, Iveco
Iveco
Iveco, an acronym for Industrial Vehicle Corporation, originally an alliance of European commercial vehicle manufacturers such as Fiat , Unic and Magirus. Iveco is now an Italian truck, bus, and diesel engine manufacturer, based in Turin...
, Chery
Chéry
Chéry is a commune in the Cher department in the Centre region of France.-Geography:An area of farming and forestry, comprising the main village and a hamlet, situated in the valley of the river Arnon some south of Vierzon, at the junction of the D75, D165 and the D68 roads.-Population:-External...
etc. - have facilities and plants in Spain today developing and producing vehicles and components, not only for the needs of the internal market but also for exportation purposes, with the contribution of the automobile industry in 2008 rising up to the second place with 17,6% out of the country's total exports.
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
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
- Alternatives to Fiscal Austerity in Spain from the Center for Economic and Policy ResearchCenter for Economic and Policy ResearchThe Center for Economic and Policy Research is a progressive economic policy think-tank based in Washington, DC, founded in 1999. CEPR works on Social Security, the US housing bubble, developing country economies , and gaps in the social policy fabric of the US economy.According to its own...
, July 2010