Current affairs

Victor Ruiz Ezpeleta, professor of Project Management Master of EAE Business School

Wednesday, 11 de January, 2017

By Victor Ruiz Ezpeleta, lecturer on the Master in Project Management at EAE Business School

According to Ministry of Economy in its article published on 22nd December 2016, the data gathered give cause for optimism. Once again, exports have set new records that encourage us to see the glass as more than half full. Although, in some sectors, the recovery is really keeping people waiting, macroeconomic data remain positive for Spain overall.

Exports from January to October 2016 were registered at a value of 210,292 million euros, representing a rise of 0.9% compared to the previous year. This is a smaller increase than recorded for September but it remains a positive trend and the role of exports is gradually consolidating its status as a key pillar of the economic recovery. Imports fell by un 1.6% to reach a total of 225,352 million. A slight drop but more than exports, thereby reducing the gap between exports and imports (balance of trade) which has risen to reach a trade deficit of 15,060 million (in the period from January to October).

While we still have a deficit, which is clearly not a positive thing, it is 26.6% lower than the shortfall recorded for the same period the previous year and the second best balance since 1997 (only beaten by 2013, which is curious as it was still a year of recession in Spain). This indicates that we have one of the lowest deficits and we must not miss this opportunity to continue this trend and head towards a zero deficit, which is highly desirable for greater economic growth and a sign of prosperity.

As a country that does not produce petrol and other fuels, our energy balance remains one of our weak points. However, the fall in the price of fuels has benefited the European Union in general and Spain in particular, with a reduction of 41.6%. The recent agreement of the OPEC countries with Russia to block production is already causing the price of oil to rise (we could not expect the situation to last forever). One area for improvement is to promote other sources of energy in order to continue lowering this deficit and to reduce our dependence on imported energy, thereby improving the balance of trade.

In comparison to other countries in the European Union, Spain remains above average in terms of the level of exports (-1.2%), far above countries such as France (-2.2%), the United Kingdom (-3.2%) and Germany (0.3%). The statistic is a good indicator in itself as it enables us to increase production and grow in terms of exports. However, the analysis should not be left there and the level of salaries is an important factor with respect to this data. It is the task of politicians, employers and trade unions to reach significant agreements in order to begin to raise salaries and the purchasing power of employees. Moreover, we should not forget that we have to wait for the driving forces of Europe to push forward, as we have to advance together towards continuing to improve the trade deficit with the rest of the world.

The bad news is that the United States, China and Japan have decreased their exports, which suggests that there are still significant issues to be resolved and the progress is not as fast as we would like.

The European Union remains Spain’s biggest customer (66.4%), as should be the case with the treaties and trade in place. However, we should not forget markets further afield that have been emerging for some years now and which may continue to contribute towards economic development. Canada, China, Hong Kong and Morocco are experiencing considerable increases that must be exploited even further. Markets that remain small or which have undergone significant falls such as Oceania and Latin America must continue to be promoted. Without a doubt, competition and globalization also have their downside in markets that were traditionally more friendly.

The Autonomous Communities that recorded the highest growth in percentage terms were Castilla la Mancha, Castilla y León and Galicia, which is very positive as these are not traditionally the regions that export most, bringing added value to the national economy.

The final statistics in the Ministry of Economy’s report are based on figures recorded for October, with numbers extremely similar to those mentioned above. It is perhaps worth highlighting a slight reduction of a few percentage points that may cause a small decrease in the good figures recorded to date, but Spain still has a trade surplus with the European Union, a fact that underlines the value of Spanish products, particularly in Europe.

While the hard work is far from over, we are on the right track. We hope that pay rises will return before long and that this does not mean a significant step backwards in terms of exports. Reinforcing our traditional strengths and investing in renewable energies in order to reduce our foreign dependence must be the medium term goals to make the definitive leap forward in terms of the balance of trade.

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