The Spanish economy has amassed
significant economic and financial imbalances. The diagnosis and analysis of
these issues must be the starting point for the design of a self-consistent
economic policy. The imbalances are chiefly located in three fields: financial
imbalances, negative growth and severe job destruction. Each feeds upon the
other, so creating a negative dynamics that must be reversed.
On one hand, the financial imbalances are
highly significant. In 2011, the target having been fixed at 6%, the public
deficit actually recorded was 9.4% of GDP. This created uncertainty as to the
country’s ability to undertake budgetary consolidation and the future
sustainability of its public debt. Over the past four years, public debt has
grown at a worrying rate, having risen from 36.3% of GDP in 2007 to 84.1% by
2012.
In addition, although the process of
private deleveraging of the Spanish economy is already underway, private
indebtedness still stands at very high levels, mainly in relation to the
property sector. These high levels of public and private indebtedness are
largely dependent on external sources, as shown by the fact that external debt
in July 2012 stood at 169.8% of GDP. The magnitude of the external indebtedness
of the Spanish economy should nonetheless be viewed against the background of
the fact that in net terms the total net international investment position of
Spain lies at 90.6% of GDP.
Since
2008, the Spanish economy has displayed a very limited capacity for growth. A
brief uptick was seen in 2010, but this fragile recovery had faded by mid-2011.
In the second half of 2011, a new downturn began. By year-end, the final
quarter had seen a 0.5% decline in production. The recession has continued into 2012, with GDP falling by 1.4%.
Finally, the Spanish economy has undergone
a severe process of job destruction. Whereas unemployment in 2007 stood at 8%,
by the final quarter of 2012 it had grown to 26%.
All these imbalances are interrelated. The
high level of the public deficit raises public debt and undermines investor
confidence; in turn, economic growth and employment in the short term are
adversely affected.
However, over the past few years major
adjustments have been made. For example, in 2012, the current account deficit
of the economy stood at 0.8% of GDP, as against 10% in 2007. At the same time,
major improvements are taking place in competitiveness, as shown by the recent
performance of unit labour costs, which in 2012 declined by 3.4%1.
The deleveraging of the private sector has also begun. In the third quarter of
2012, private indebtedness stood at 212% of GDP.
This necessary process of correction
carries a range of costs, such as weak growth – 0.4% in 2011 – and a return to
economic recession, with negative growth of -1.4% in 2012.
As in
2011, internal demand in 2012 continued to play a decisive role in the decline
of GDP. In 2012, internal demand subtracted 3.9 points from year on year GDP
growth, as against the 1.9 points subtracted in 2011. In 2012, the consumption expenditure of households and nonprofit institutions
serving households recorded an average annual decrease of 2.1%, having declined
1% the preceding year. Final consumption expenditure of government, largely as
a result of fiscal consolidation measures, had decreased by year-end by an
annual average of 3.7%, after the 0.5% decrease of 2011. Throughout 2012,
housing investment continued to adjust downward, with a year-end decrease of
8%, as compared to 6.7% the previous year. In line with the recessive behaviour
of domestic demand and the slowdown of exports, investment in equipment
likewise slowed down last year, showing a drop of 6.6%, as against 2.3% growth
in 2010. Worsening economic prospects and tighter credit terms prompted Spanish
enterprises to postpone their investment projects.subtracted in 2011. In
2012, the consumption
In 2012,
the main driver of the Spanish economy continued to be the export sector, which
contributed 2.5 points to the annual change in GDP as a result of a
considerable advance (+3.1%) of exports of goods and services and a sharp
decline (-5.0%) of imports; in 2011, exports had grown powerfully (+7.6%),
while imports had dropped slightly (-0.9%). The performance of exports of goods
and services in 2012 continued to display a great deal of strength, as in 2011.
Growth in 2012 was similar to world growth in trade in goods and services (3.2%
in 2012 and 5.8% in 2011), according to estimates published by the
International Monetary Fund (IMF): trade in goods and services (3.2% in 2012
and 5.8% in 2011), according to estimates published by the International
Monetary Fund (IMF), this
suggests a gain in market share. Since 2009, nominal exports of goods and
services have grown by 43%.
In 2012, the slowdown
of Spain’s main export markets elicited the slowing of the growth of Spanish
exports, which had already begun in the second half of 2011.
Imports, on the other hand, shrank severely,
reflecting the steep drop in internal demand and the slowing of Spanish export
growth in 2012. The outcome of these trends is that, for the fifth year
running, the export sector has contributed positively to growth, thus buffering
the shrinkage of internal demand.
From the standpoint of supply, in 2012 all
branches of activity, except agriculture, shrank in size. In 2012, the gross
value added (GVA) of agriculture grew by 2.2%; GVA declined by 2.9% in
industry, 8.1% in construction and 0.4% in services.
No comments:
Post a Comment