In Spain, a positive look at the economy, at last

The latest edition of IESE Business School’s International Economic Overview (May 2013, nº 8), makes reference to the report prepared by the Spanish Business Council for Competitiveness (“Consejo Empresarial para la Competitividad”), a “think tank” formed by 17 CEOs of Spanish multinational companies.

This report, titled “Spain, a Land of Opportunities” includes a cautiously positive look at the situation and prospects of the Spanish economy, emphasizing aspects that allow some optimism.

The conclusion of the report is simple: Spain is having a hard time, but it has the resources to overcome the situation within a reasonable period.

Below is an extract of IESE’s article, written by Prof. Juan José Toribio, highlighting the report:

  • Spain has reduced its current account deficit by almost 10% of GDP. Exports of goods and services have increased, now making up more than a third of GDP.
  • The corrective measures implemented last year by the Spanish Government are said to have amounted to 4,7% of GDP. Without such measures, the fiscal year would have ended with a public deficit of 11,6%, instead of the actual 6,9%.
  • Economic forecasts that predict a 1,5 percent drop in GDP for 2013 would mean a minimum of zero growth in the third quarter and an upward trend (+0,3) in the year’s final months. The path of a renewed expansion will have eventually started after eight consecutive quarters of economic decline.
  • The productive structure of the Spanish economy is also noteworthy, considering that the political climate, the media and the economic literature have not always highlighted it.
    • Of the Spanish workforce, 38% hold university degrees, a rate above the European average (30%).
    • Spain is tenth in the world of scientific production (publications) and is growing faster in this than the United States and the European average.
    • For the economy as a whole, the difference between productivity (GDP per employee) and wage cost is 28.000 €, equivalent to the average for Germany, France and Italy.
    • Innovative companies are growing rapidly in fields such as biotechnology, aerospace, information and telecommunications, machine tool technology, sophisticated automotive components, high speed trains, renewable energy, greenhouse agriculture, etc., sectors in which the country plays a significant role.
    • In the world of services, Spain does not fit in with the vacation destination stereotype. In fact, the export of services unrelated to tourism (63 billion €) outweighs tourism revenue (43 billion €), including engineering and project exports, associated in many cases with management or construction of advanced infrastructure, and also the sale of cultural services, international insurance revenues, exports of services relating to information technology and communications, etc.
    • With regard to tourism, Spain continues to rank second in the world in terms of revenue and income without matching the stereotype of the sun and beach market. In fact, Spain ranks second in the world in cultural heritage. It also ranks third in the world in visitors associated with congresses, scientific and cultural conventions, trade shows and business trips.

The conclusion from these data is straightforward: notwithstanding the depth and breadth of the current crisis, Spain is underestimated in terms of production structure and economic potential. There is hope and there must be optimism for the future of the country, something that Spain needs more than any other resource.

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