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January 27, 2023

Spain’s economic comeback

Mr. Agustín Navarro de Vicente-Gella, Economic and Commercial Counsellor with the Embassy of Spain to Bucharest:

Since the release of last year’s special edition on Spain’s National Day, Spain’s economic outlook has grown more robust. Therefore much of what I stated one year ago is still valid. However, what one year ago was the forecast on Spain’s economic recovery is actually taking place right now.
In the second quarter of 2014, the Spanish economy intensified its growth path that started in the fourth quarter of last year, linking three quarters of positive growth. The causes for this growth are, among other factors, the deleveraging process of the private sector and the boost of the domestic demand. The latter was driven by the greater confidence and the better performance of the labour market.
GDP in volume, seasonally and calendar adjusted, increased by 0.6% q-o-q during the second quarter of 2014, accumulating four consecutive quarters of acceleration. In annual terms, the GDP increased by 1.2%, enforcing the first positive rate recorded in the previous period since the third quarter of 2011.
The recovery of the activity was sounder than forecasted by the leading national and international organizations. Thus, the Bank of Spain has slightly upgraded its growth forecasts for this year and the next, up to 1.3% in 2014 and 2% in 2015. These rates are 0.1 p.p. and 0.3 p.p higher compared to the ones forecast in March.
Private consumption increased for the fifth consecutive quarter while gross fixed capital formation recorded a 0.5% q-o-q increase in the second quarter, after the decline that took place in the previous quarter (-0.7%), resuming the positive values of the last two periods of 2013 (0.7% in both cases). This result is explained by the combined increase in equipment goods investment (2%) and investment on construction (0.9%).
In the period elapsed this year, the Spanish labour market has intensified its favourable trend started in the middle of 2013. According to the Labour Force Survey and other labour indicators of employment and unemployment, in the second quarter unemployment continued to decline and job creation accelerated. During the second quarter of 2014, the Spanish economy created 402,400 net jobs in that period, a much greater increase than that which took place in the same quarter of 2013. The employed population totaled 17.353 million.
In turn, wages and labour costs extend the moderation trend in a context of low inflation which, together with productivity gains, leads the ULC to further decrease, with the consequent gains of competitiveness abroad. This allows Spanish exports of goods and services to continue to fair well in a challenging international context.
In the first seven months of this year, Spanish goods exports have grown by 1.6% compared to the same period of last year, which is a more modest pace than that of last year and than that of Germany, but still outpaces those of the rest of the biggest EU countries. Spain has a trade surplus with the Eurozone and with the EU since 2011 and a non-energy goods trade surplus since 2012.
Moreover, services exports in the first six months of 2014 have grown by 6.8% y-o-y, led by the 8.1% growth of non-touristic services, which already represent more than 60% of Spain’s services’ exports and in which Spain has reached a surplus of almost €4 billion.
In this context, bilateral trade between Romania and Spain is growing at a robust pace. Spain’s exports grew 9.45% during the first seven months of the year to €775.67 million, while Romania’s grew by 9.9% to €650.66 million.
As regards bilateral investments, Spanish direct investments in Romania are picking up to €15.8 million in the first half of 2014, more than the total amount of 2013, although still far from prior figures. Conventional sources of energy and logistics are, for the first time, the leading sectors of Spanish investments, showing both Romania’s natural endowments and competitive advantages and Spain’s expertise. In any case, Spanish investments in Romania are still significantly bigger than those in the opposite direction, despite also picking up this year compared to 2013.
Spain currently offers a number of opportunities. Specifically, Spain is reaching a high level of buoyancy and leadership within Europe in activities linked to sectors such as automotive, biotechnology, pharmaceutical and life sciences, information and communications technology, aerospace, logistics and transport, and water and environment.
Given Romania’s government and companies’ growing interest for non-EU markets, and thanks to our centuries’-long bonds, Spain is extremely well placed to play, for Romanian companies, the role of hub or platform to reach Latin American and North-West African markets. In particular, Spain holds 16 agreements to avoid double taxation and 20 agreements for the protection and promotion of investments both-ways with Latin American countries. Madrid concentrates 35% of all of Europe’s air traffic with Latin America. Likewise, Spain holds both kinds of agreements with Morocco, Algeria and Tunisia, among other Mediterranean countries. The Canary Islands are increasingly proving their potential to serve as a hub to connect with Western Africa. Romanian corporate could take advantage of the fact that some of the best Romanian professionals are already available in our country, among the close to 1 million strong Romanian community living and believing in Spain.

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