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Spain avoids recession with the advantage of attracting tourism and another year of trade surplus

Spain will close 2022 with a positive current account balance (the difference between exports, including tourism, and imports in relation to GDP) for the eleventh year in a row. And this will happen despite the historic escalation of energy taxes (due to rising prices of oil and gas). This strength reflects the transformation of the economy since the Great Financial Crisis of 2008. In this inflationary crisis, it is the main engine of growth resilience.

It can be considered crucial to explain the resilience of our country’s economy, which is the only one of the four big ones in the European Union (EU) to avoid a technical recession (two consecutive quarters of declining activity), according to most forecasts. . And the one that will grow the most in both 2022 and all of 2023.

“We expect Germany and Italy to be more affected by the energy crisis than France and Spain. The most important reason is that the former are more dependent on Russian gas imports, while the latter have diversified energy sources and are relatively more intensive in the service sector. This is especially true in the case of Spain, which still has room to recover from the COVID-19 crisis,” observes a team of Goldman Sachs analysts.

“Good labor market indicators and savings accumulated by families [por supuesto de forma muy desigual entre los más ricos y los más pobres] They can also provide some support to consumption in the short term,” said Riccardo Marcelli, an economist at Oxford Economics.

“However, the large impact of inflation on real earnings and uncertainty suggests that the outlook will be weak.” Meanwhile, the ECB interest rate hike is already dampening business investment [lo que contrarresta en parte los fondos europeos]. As a result, it is unlikely that the Spanish economy will survive a mild winter contraction. But it will hold up well. And this is probably due to the fact that the gross domestic product is still 2% below the pre-pandemic level, which is why it is being increased by the recovery effect and the continued rise of tourism”, he analyzes.

Transformation of the economy

“15 years ago you told me this and it seemed impossible,” says David Cano, managing partner of AFI. “The current account balance is one of the best ways to measure whether an economy is living beyond its means,” reflects this economist. “Deficits mean someone is going to fund you, and that happened between 2002 and 2012,” he continues.

“There is only one country that can have a deficit [comercial]And this is the United States,” AFI expert notes. “Spain managed to correct this current account deficit: on the one hand, because we tightened our belts. [sufrió una fuerte devaluación, que para las familias se tradujo en una fuerte pérdida de poder adquisitivo que ahora vuelve a repetirse]We stopped taking loans, the housing market was cleared…” he continues.

Today, “the big news is that we are able to export: we spend less, but the most important thing is that we get more,” he notes. The first major factor in this transformation was tourism, with a record 84 million travelers in 2019. This 2022, the first year without restrictions due to the pandemic, visits to Spain will still be between 15% and 20% minor.

“Tourism was a replacement for construction,” David Kano believes. “The economy has entered a crisis [de la pandemia] It’s in very good shape,” agrees Francisco Quintana, Strategy Director of ING Spain. The greatest intensity of the return was reserved for this 2022, before the start of the war in Ukraine, “thanks to the good recovery of the tourism sector in particular”, says Quintana, who recalls that it is a fundamental industry “that contributed to 14% of the GDP in 2019.”

In addition, Spanish companies were able to sell more goods and services (consulting, training…), so that exports in Spain are 32%, while the average of developed countries is close to 25%.

The great paradigm of current account surpluses is Germany, but that is changing due to an inflationary crisis due to dependence on cheap energy. Now your industry is not as competitive. At the same time, the greater weight of services in our country offers a great advantage.

“In a year when we spend more money on oil, we make up for it with exports and tourism,” concludes David Cano, of AFI. However, the latest survey of the export situation of the Ministry of Industry, Trade and Tourism reflects worse expectations compared to previous quarters.

Almost all institutions and firms of the Funcas Panel “revised the forecast of export growth more than the increase in the estimate of import growth”, emphasizes the think tank itself.

The best news comes from tourism. The hotel sector registered a 14.6% increase in revenue per available room compared to 2019. The increase was especially significant in the month of August, as it was 16.9% more than the 2019 data.

Source: El Diario





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