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Economy of Spain
Rank	12th (nominal) / 13th (PPP)
Currency	1 Euro = 100 eurocent
Fiscal year	Calendar year
Trade organizations	EU, WTO and OECD
Statistics
GDP	€1.051 trillion ($1.37 trillion) (4th term 2010)[1]
GDP growth	0.8% (1T/2011)[2]
GDP per capita	$29,651 (PPP) 2010[3] $29,875 (nominal) 2010[3]
GDP by sector	agriculture (2.3%), energy (2.3%), industry (11.7%), construction (10.0%), services (66.6%) (Dec. 2009)[1]
Inflation (CPI)	3,2% (June 2011)[2]
Population below poverty line	19.8% (2005)
Gini index	32% (2005)
Labour force	23.0 million (Apr. 2010)[2]
Labour force by occupation	services (70.7%), industry (14.1%), construction (9.9%), agriculture, farming and fishing (4.5%), energy (0.7%) (Sep. 2009)[1]
Unemployment	21% (Jan. 2011)[4]
Average gross salary	2,292 € / 3,094 $, monthly (2006)[5]1
Average net salary	1,523 € / 2,056 $, monthly (2006)[6]
Main industries	metals and metal manufactures, chemicals, shipbuilding, automobiles, machine tools, Tourism,[7][8] textiles and apparel (including footwear), food and beverages.
Ease of Doing Business Rank	49th[9]
External
Exports	€248.9 billion ($341.6 billion) F.O.B. (2009)[1]
Export goods	Machinery, motor vehicles, chemicals, shipbuilding, foodstuffs, electronic devices, pharmaceuticals and medicines, other consumer goods
Main export partners	France 18.3%, Germany 10.6%, Portugal 8.7%, Italy 8%, U.K. 6.7%, U.S. 4.2% (2008)
Imports	€270.4 billion ($371.1 billion) (Oct. 2009)[1]
Import goods	Fuels, chemicals, semifinished goods, Machinery and equipment, foodstuffs, consumer goods, measuring and medical control instruments
Main import partners	Germany 14.5%, France 11.1%, Italy 7.4%, China 6.2%, U.K. 4.5%, Netherlands 4.4% (2008)
FDI stock	$649.9 billion (31 December 2009 est.)
Gross external debt	$2.166 trillion (30 June 2010)
Public finances
Public debt	63.4% of GDP (2010 est.)
Revenues	$515.8 billion (2010 est.)
Expenses	$648.6 billion (2010 est.)
Economic aid	$1.33 billion (donor) (1999)
Credit rating	Standard & Poor's:[10] AA (Domestic) AA (Foreign) AAA (T&C Assessment) Outlook: Negative[11] Moody's:[11] Aa1 Outlook: Rating Under Review Fitch:[11] AA+ Outlook: Negative
Foreign reserves	$34.375 billion (April 2011)[12]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

The economy of Spain is the twelfth-largest economy in the world, based on nominal GDP comparisons, and the fifth-largest in Europe.^[13] 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.^[14] Spain's economy had been credited with having avoided the virtual zero growth rate of some of its largest partners in the EU.^[15] 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, a process that is rapidly being reversed.^[16]

More recently, the Spanish economy had benefited greatly from the global real estate boom, 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.^[17] 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.^[18] A European Commission forecast had predicted Spain would enter a recession by the end of 2008.^[19] According to Spain’s Finance Minister, “Spain faces its deepest recession in half a century”.^[20] Spain's government forecast the unemployment rate would rise to 16% in 2009. The ESADE business school predicted 20%.^[21]

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.^[22] 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.^[23]

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,^[24] a large underground economy,^[25] and an education system which OECD reports place among the poorest for developed countries.^[26] 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).^[27][28][29]

Contents 1 Growing reduction of European Union funds 2 2008–2009 financial crisis 3 Spanish banking system 4 The 2010 Euro debt crisis 5 Employment crisis 6 Prices 7 Energy 8 Economic ties 9 Sectors of the economy 9.1 Tourism 9.2 Automobile industry 10 References and notes 11 External links 11.1 Statistical resources 11.2 Further reading

[edit] 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.

[edit] 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 Zapatero, 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,^[30] 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.^[31]

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.^[32] 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,^[33] 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.^[34]

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.^[35] 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.

[edit] 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 provisions 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.^[36]

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.^{[citation needed]}

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.^[37] Price Waterhouse 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.^[38]

[edit] 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.^[39] Though 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.^[40]

On May 23, 2010, the government announced further austerity measures, consolidating the ambitious plans announced in January.^[41]

[edit] 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 employment, 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,^[42] so far, the country is suffering Europe's biggest unemployment crisis.^[43] 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.^[44] 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.^[45] In this same month, Spain for the first time in its history had over 4,000,000 people unemployed,^[46] an especially shocking figure even for a country which had become used to grim unemployment data.^[45] Although rapidly slowing, immigration continued throughout 2008 despite the escalating unemployment crisis, worsening the situation.^[47] 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.^[48]

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.^[49]

[edit] Prices

Due to the lack of own resources, Spain has to import all of its fossil fuels. 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.^[50][51]

[edit] Energy

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.^[52]

[edit] Economic ties

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.^[53] 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^[54]), 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.^[55]

[edit] Sectors of the economy

[edit] 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.^[56] 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.^[57]

[edit] 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.^[58]

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,^[59] 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.^[60]

[edit] References and notes

[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
• Alternatives to Fiscal Austerity in Spain from the Center for Economic and Policy Research, July 2010
• O'Neill, Michael F.; McGettigan, Gerard (2005), "Spanish biotechnology: anyone for PYMEs?", Drug Discovery Today, News and Comment (London: Elsevier) 10 (16): 1078–1081, 15 August 2005, doi:10.1016/S1359-6446(05)03549-X, ISSN 1359-6446 

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