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December 4, 2022

Agustín Navarro De Vicente-Gella, Economic and Commercial Counsellor with the Embassy of Spain to Bucharest: Spain’s economic comeback

In the last couple of special editions on the occasion of Spain’s National Day, I have been writing about the Spanish economy’s recovery and each year the outlook is better than that of the previous one. Actually, Spain’s GDP grew by 3.1% year-on-year in the second quarter of 2015, with a growing trend (2.7% in the first quarter of 2015, 2% in the 4th quarter of 2014, 1.6% in the 3rd quarter of 2014, 1.2% in the 2nd quarter of 2014 and 0.6% in the first quarter of 2014). Spain’s GDP grew by 1% quarter-on-quarter in the second quarter of 2015, making it the 8th consecutive quarter of positive growth.

If in 2013 the first signs of recovery were based on external demand, since 2014 domestic demand has been gaining momentum. In the second quarter of 2015 domestic demand contributed with 3.3 percentage points to GDP’s growth, with investment taking the lead with a 6.1% growth, y-o-y. External demand had a negative contribution to growth of 0.2 p.p., despite a robust 6% goods and services growth rate, but lower to that of imports, which grew at a pace of 7.2%.

However, despite this negative contribution of external demand, Spain still shows a higher current account surplus in the first half of 2015 compared to same period of 2014, reaching almost €4.7 billion, thanks to the reduction in the trade deficit, in turn due to an increase of 6.8% in goods exports, the increase in the surplus of non-touristic services, whose exports grew by 11.8%, and to a reduction in the income deficit.

Even if goods exports to EU countries have grown significantly faster than to non-EU countries in the first half of 2015, Spanish exports are performing very well in some markets, such as Canada (+23.1%), United States (+10.6%), Chile (+26.2%), Mexico (+17.6%), South Korea (+18%), Saudi Arabia (+45.2%), United Arab Emirates (+22.5%), Egypt (+30.4%), Australia (+21%), Indonesia (+16.7%), India (+13.5%) and South Africa (+9.1%).

Spain’s exports’ performance is expected to be sustained as, according to the Spanish Ministry of Economy and Competitiveness’ Quarterly Competitiveness Report, our country’s price competiveness improved in the 2nd quarter of 2015 compared to the EU (for the 7th consecutive quarter) as well as to the OECD, thanks both to low inflation and the evolution of the Euro’s exchange rate.

It is therefore not surprising that multinational firms continue to consider Spain worthy of their trust, as UNCTAD’s 2015 World Investment Report shows. According to this source, Spain was the 12th country with the highest inflow of Foreign Direct Investment and the 2nd European country in the ranking, with almost €23 billion.

Overall, Spain’s GDP is expected to grow by a range of 2.8% (European Commission) to 3.1% (IMF) this year, depending on the forecasts, perhaps even more (the Spanish Government’s forecast is 3.3%). In any case, the Spanish economy’s growth will be significantly above the European Union’s average, both this year and the next. Forecasts for the Spanish current account surplus for this year and the next range from 0.9% of GDP (IMF) and 1.3% (OECD), depending on the forecasts.

In this context, bilateral trade between Romania and Spain is growing at a robust pace. It grew by 15% in 2014 to €2.74 billion, with Spanish exports growing by 21.7% to €1.57 billion and Romanian ones growing by 7% to €1.17 billion. In the first seven months of 2015, our bilateral trade has been growing further by 25.53%, with Spanish exports growing by 33.87% and Romania’s exports by 11.59%.

After several years with a decreasing trend, we are seeing that Spanish companies have already been awarded a higher amount of public contracts in 2015 by the Romanian Authorities than during the whole of any of the last two years, thanks to Spanish firms’ participation in new important contracts for Bucharest’s Underground Line 5 and the Suplacu de Barcau-Bors highway. We are positive these figures will continue to grow as the 2014-2020 EU funds continue to unfold. In order to seize these opportunities, the Spanish Embassy is undertaking several activities, such as the EU Funds Day that was held in May, with the gracious support of the Romanian Ministry of EU Funds, the Ministry of Regional Development and Public Administration and the Ministry of Agriculture and Rural Development. This activity, which was carried out as a follow-up to the visit of the Spanish Secretary of State for Trade, H.E. Mr. Jaime García-Legaz, to Bucharest, in March 2014, attracted 82 attendants, including 52 representatives of 40 Spanish companies.

As regards bilateral investments, Spanish direct investments in Romania peaked to almost €182 million in 2014, the highest inflow of Spanish investments in Romania since 2006, led by the energy sector, both renewables and conventional.

On the other hand, 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 many sectors, including those in which Romanian companies are taking steps to become world players such as information and communications technologies, logistics and transport.

Given Romania’s government and companies’ growing interest for non-EU markets, and thanks to our centuries’-long bonds, I once again insist that 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 17 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 corporates 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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