The Spanish export model

The foreign sector is providing a healthy supply of oxygen, propelling the Spanish economy above activity levels prior to the pandemic. Now the unknown is whether that lung will continue despite the slowdown that is perceived in our main export markets.

Without the external boost, GDP would still be 2.5% below the fetish threshold of the pre-covid era, mainly as a consequence of the anemia of private consumption, weighed down by the erosion of purchasing power suffered by households. Among the national demand factors, only public consumption is saved and, to a lesser extent, investment in equipment.

The internal panorama contrasts with the dynamism of exports of goods and services: today foreign customers buy more than 4 out of every 10 euros generated in Spain, a sharp rise compared to 2019 and almost twice as much as before the crisis financial. We are therefore witnessing the acceleration of the internationalization process of our economy. Since, on the other hand, imports grow at a slower rate, the result is a positive contribution to GDP growth, more than offsetting the weakness of demand emanating from resident sectors.

The normalization of tourism is of great help, but the pull does not come only from “sun and sand”. It is also worth noting the boom in non-tourism services (30% since the end of 2019 in real terms, that is, discounting inflation), and to a lesser extent in merchandise exports (5.5%). Behind these references is the European market, as evidenced by the growing surplus in trade with the EU, which has more than tripled since 2019. Thanks to these surpluses, we have been able to comfortably face the increase in energy import bills.

Another powerful factor is international investment in our productive fabric (so-called foreign direct investment). According to harmonized data from the OECD, Spain is the eurozone country that receives the most direct investment, after France. In addition, the inflow of productive capital has almost doubled compared to 2019 (84%), an achievement in a context of declining investment globally (-27%). The investment comes mainly from other European countries, in a similar way to what happens with exports. All this configures the deepening of the single market and a relocation in our country of the production chains of some sectors. It is premature to determine if it is a structural change as a consequence of deglobalization, or a temporary phenomenon.

But we won’t have to wait long to find out: the European economy is showing worrying signs of slowing down, putting the external lung to the test. The eurozone purchasing managers’ indicators have taken an unexpected turn, which would be consistent with some contraction in activity at the start of summer, especially in industry. In Spain, the most recent data on sales of large companies and Social Security registrations, with a surprisingly negative first half of June in seasonally adjusted terms, also point to less dynamism. Interest rate rises are causing a reduction in demand across the euro area, as shown by the worrying decline in newly granted bank loans. We are therefore looking at a less buoyant second part of the year.

All in all, the facts show the good competitive positioning of our productive apparatus, something that will have to be taken care of since we need an external surplus both to maintain the path of growth in the short term, and to take advantage of the risk reduction process, which results in an approach of production to places of consumption. Time will tell if this risk reduction phenomenon, or “de-risking”, is beneficial for the Spanish economy. For now, the feelings are positive.

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