Luis Pinheiro de Matos (CaixaBank Research | The pandemic has been felt in all sectors of the economy, especially in tourism services, a key sector for the Spanish economy. However, the external sector has withstood an unprecedented shock very well, and despite the absence of this traditional contribution, the current account has managed to maintain a surplus. The starting point for rebuilding a sustainable growth trajectory is better than one might expect.
Focusing on the balance of goods in 2020, a year with a historic drop of 10.8% of GDP, Spain’s exports of non-energy goods fell by 8.3%, but managed to stay above 250 billion euros (around 22% of GDP) for the fourth year in a row. This, combined with the decline in imports, led to an import coverage rate of 0.95 and a goods balance deficit of 1.2% of GDP, an all-time low.
To understand this good dynamic of the external sector in an environment of strong economic weakness, as well as the medium-term prospects of the sector, it is necessary to put into perspective the evolution of Spanish exports over the last decade. Between 2000 and 2008, the Spanish economy had an average current account deficit of 6.2% of GDP. This was the result of historical trade imbalances in the goods and income accounts (of – 7.4% and – 2.5% of GDP on average over this period, respectively) which were only partially offset by the account surplus. services. Between 2009 and 2020, however, the current account recorded an average surplus of 0.5% of GDP. This was driven by a significant improvement in the balance of goods excluding energy, which went from an average deficit of –4.7% of GDP between 2000 and 2008 to a surplus of 0.1% from 2009 , with 7 surpluses in 12 years.
The coverage rate for imports of non-energy goods thus rose from 0.78 in 2008 to a high of 1.13 in 2013, thus stabilizing around 1 (see first graph). The improvement in the trade balance reflects the competitiveness gains made over the past decade, both in relation to the euro area countries (as illustrated by the unit labor cost index in the first graph), which represent the main destination market for Spanish exports, and in relation to the main international competitors in different economic sectors. Since 2008, the share of Spanish goods in total euro area exports increased considerably, from 6% to 6.8% (see second table).
The agri-food sector performed particularly well. Between 2008 and 2020, the share of the Spanish market in agro-food exports from the euro zone increased by more than 2 percentage points from 9.8% to 12.6% – lift Spain to seventh place in the world ranking. But the success also extends to the manufacturing sector, both in equipment and transport goods and in other manufacturing segments. Since 2008, Spanish products have gained considerable market shares in these sectors, with gains of 5.4% and 15%, respectively (the two sectors with market shares between 6% and 7%). Moreover, in an environment of growing international competition, these substantial improvements in the international position of Spanish exports compare to a stabilization of Germany’s market share and with significant losses in the competitiveness of the manufacturing sectors in France and Italy, as well as of the French agrifood sector.
The 3 Ds of competitiveness: diversify, decarbonize and digitize
Besides these sectoral trends and the competitiveness gains in the whole Spanish economy, another promising trend is the increasing diversification of the export base. This is reflected in the steadily increasing number of companies exporting regularly, from around 35,000 in 2010 to around 47,000 in 2018, and whose trade volume amounts to 97% of the total declared volume of exports (compared to 93% in 2010). Among these regular exporting companies, medium-sized companies – defined as those with between 50 and 250 employees – recorded a 62% increase in their trade volume, while the number of medium-sized exporting companies increased by 25% (see third graph). All in all, this development reflects an improvement in both the extensive margin and the intensive margin. In other words, it represents an expansion of the export base and also of the average size of exporting companies. This can also be seen as an additional factor in the competitiveness of Spanish exports, as large companies are associated with greater efficiency and better access to financial markets.
At the same time, the data suggests that Spain’s foreign sector has already started the process of decarbonization in recent years. The intensity of carbon dioxide (CO₂) in Spanish exports decreased by 22% between 2009 and 2019, against 8.5% in the euro zone as a whole (see fourth graph). Besides being a good sign for the decarbonization of the economy, this factor could be an indication that Spanish companies are in a good competitive position for the first stages of the climate transition and the major structural reforms to come. Finally, in parallel with the decarbonisation of exports, the digitization process will intensify in the years to come, with the emergence of new opportunities linked to e-commerce, but also with the challenges that will test the capacity of companies. to reinvent their production and management processes in order to become more competitive. More than ever, these transformations will underline the importance of investments in infrastructure and human capital, which is widely recognized as one of the major challenges of the Spanish economy.
Where the Spanish foreign sector is heading: now is the time to take a step forward
Over the next few years, the Spanish economy will face significant challenges. Diversification, digitization and decarbonization could emerge as the most visible faces of the deep structural transformation that will take place. To this end, in the coming months, the Spanish economy will receive a major boost in the form of funds from the NGEU program. Once the roadmap is defined, it remains only to execute the plan: to reach the podium in this arduous triathlon, all available tools will have to be used to maximize the speed of execution and minimize the risk of hitting stones. stumbling block along the way. The continued success of the Spanish export sector will depend on each D, for the detail.