the spanish economy

The Spanish Economy

Francisco Liñán

Dept. Economia Aplicada I

Universidad de Sevilla

Outline

10 October 2011 2

The ‘Highs’ and ‘Lows’ of the Spanish

Economy

Accession to the EU

Population and migration

Employment

Tourism

Energy resources

10 October 2011 3

‘Highs’ and ‘Lows’ of the Spanish Economy

High-income country (US$ 30475, PPP 2008)

High Human Development Level (0.863,

#20)• Especially high in Health (0.970)• Life-expectancy at birth = 81.3 years

Universal Social Security system

Tourism attraction (2nd Internat. destination)

Green technologies

The ‘Highs’

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High unemployment (> 20%)

Lower competitiveness

External deficit

Weak Research & Development

Low entrepreneurship

The ‘Lows’

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Spain in the European Union

Application in 1977

Accession in 1986

Change of reference framework

Single Market implementation

Project for a single currency

Launch of the Euro (1999)

Accession to the EU

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Financial supportEuropean Funds paid to Spain (1986-2006):

1,8% GDPA)EAGGF-Guarantee and others (45% of total)B)Structural Funds (55% of total)

1. ERDF (50% of structural funds)2. ESF (22%)3. EAGGF-Guidance & Fisheries (15%)4. Cohesion Fund (13%)

Net balance between Spain & EU (1996-2996): 1% GDP

Estimated effect of European Funds on Spanish growth and income

Without funds

With funds

Annual growth of GDP 1988-2006

2,37% 2,75%

GDP per capita 2006 (EU-15=100)

83,61% 89,39%10 October 2011 8

NET BALANCE BETWEEN SPAIN AND EU (1996-2006):

1% of GDP

NET BALANCE BETWEEN SPAIN AND EU (2007-2013):

0,2 % of GDP

Net balance

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Main economic indicators

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10 October 2011 11

Population and migration

Low population growth since early 1980s

Ageing of the population

Duality in the labour market

• High unemployment

• Positions not covered

Immigration growing very quickly

Population and migration

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Population in Spain (2010) = 47.150.819 (93,4 inhab./Km2)

Large internal differencesEU-15 EU-25 EU-27

(2007)

120.9 117.3 114.8

Spain’s population

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Economic effects•Supply: less flexibility•Demand: Slower growth + increased expenditure•Welfare state: increased dependency

Problems of Population

ageing

Increased expenditure

Stagnated Demand

Older labour force

Increased dependency

Population ageing

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The opening of borders to an integrated immigration has the following benefits:

1. Increased birth rates

2. Pensions are guaranteed

3. Positions not-wanted by Spanish workers may be occupied

4. Increase in consumption and trade and, therefore, general economic growth

Immigration

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Foreign population in Spain

Year persons % total1981 198 042 0.5%1986 241 971 0.6%1991 360 655 0.9%1996 542 314 1.4%1998 637 085 1.6%2000 923 879 2.3%2001 1 370 657 3.3%2002 1 977 946 4.7%2003 2 664 168 6.2%2004 3 034 326 7.0%2005 3 730 610 8.5%2006 4 144 166 9.3%2007 4 519 554 10.0%2008 5 220 600 11.3%2009 5 598 691 12.0%2010 5 747 734 12.2%2011 5 730 667 12.2%

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Employment

Increased participation of women

Growth in tertiary sector employment

Duality (permanent vs. fix-termed contracts)

Low productivity

Changes in labour market

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Activity rate by gender(% of population over 16)

1977 1980 1985 1990 1995 1999 2007 2010

Total 50,3 48,7 47,5 49,4 49,0 50,2 58,9 60,0

Male 75,2 72,1 67,3 66,7 62,7 63,1 69,3 68,1

Female 27,5 27,1 27,8 33,4 36,2 38,4 48,9 52,3

01020304050607080

Source: EPA

Participation of women

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1977

1985

1995

2005

0 10 20 30 40 50 60 70

20.6

18.3

8.8

5.3

27.7

24.4

20.6

17.3

9.9

7.3

9.5

12.4

41.8

50.0

61.0

65.0

Services Construction Manufacturing Agrarian

Source: EPA

Employment by sector

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Source: EPA

Employment by sector

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2008

2009

2010

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

4.0

4.2

4.3

15.8

14.7

14.1

12.1

10.0

8.9

68.1

71.1

72.6

Services Construction Manufacturing Agrarian

Duality in labour market

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2005 2006 2007 2008 2009 201020.0

30.0

40.0

50.0

60.0

70.0

80.0

66.7 66.068.3 70.7

74.6 75.1

33.3 34.031.7

29.325.4 24.9

Permanent

Fix-term

Source: EPA

Low productivity

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Tourism

Several different activities included

Approximation by Hostelry (% of total economy):• Direct Effect: > 7% of GDP and employment• Total Effect (direct + indirect): > 10% of GDP and

employment

Contribution to the Balance of Payments• Surplus in tourism activities• Partly compensates the trade deficit

• From a low of 33% to a high of 150%• 2010: 59% of the trade deficit

Importance of tourism

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Spain’s international position

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Spain’s international position

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10 October 2011 27

Energy

Recent evolution

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Consumption of primary energy by type of energy(ktep)

  2000 2007 2009CoalOilNatural gasNuclearRenewable energies- Hidraulic- Other renewable

energiesElectricity balance (imp.-exp.)

21.63564.66315.22316.2116.9902.5344.456

382

20.23670.84831.60214.36010.2282.3417.887-495

10.35363.67331.10413.75012.3252.258

10.067-687

Total 125.103 146.779 130.508Source: MICT (2010): La energía en España 2009, Madrid: Ministerio de Industria, Turismo y Comercio.

Very low in fossil resources High potential in renewable energies

Self-suffiency level

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2009 Internal production Imports

Total primary energy

Self-sufficiency

levelCoal 3.778 6.575 10.353 36,5%Oil 107 63.566 63.673 0,2%Natural gas 12 31.092 31.104 0,0%Nuclear 13.750 13.750 100,0%Hidraulic 2.258 2.258 100,0%

Rest of renewable 10.067 10.067 100,0%

External electricity balance (Imp.- Exp.)   -697

TOTAL 29.972 100.536 130.508 23,0%

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Innovation and technology

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R+D intensity

Universities and research centres:• Generation and transfer of knowledge

State: • Incentives, regulation

Businesses• Application (+ self-generation)

Lack of connection• Triple helix model lacks efficiency

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Spanish innovation system

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Balance of Payments

Receipts

Expenses

Balnce

369.717193.89997.54760.928173436.996

474.170281.55371.04394.982265921.440

-104.454

-87.65426.504

-34.054-9.2495.556

NVP NVA NVP-NVA

44.74252.783

94.910-8.040-52.78344.7424.268

76.229-7.68330.137

--- --- 3.989

Balance of Payments, 2008

Current accountTrade of goodsServicesIncomeTransfers

Capital account

Financial accountDirect investments

From SpainIntro Spain

Portfolio investmentOther investmentsFinancial derivativesBank of Spain (reserves & net assets)Errors & Omissions

Net borrowing requirement

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-65,000.0

-55,000.0

-45,000.0

-35,000.0

-25,000.0

-15,000.0

-5,000.0

5,000.0

Trade Balance (Million €)

Inflation, Oil, technology, competitiveness, ….

Permanent trade deficit

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Financial account

(% of GDP)

Financal accountSpanish investment abroad

DirectPortfolio

Foreign investment in Spain

DirectPortfolio

Other investment

Bank of Spain

1994 1996 1998 2000 2002 2006

1.1 -0.7 0.0 3.5 2.3 8.3

-1.2-0.8-0.4

-1.5-0.9-0.7

-10.6-3.2-7.4

-20.4-9.7

-10.7

-7.2-2.8-4.4

-6.8-7.30.5

-2.31.9

-4.3

1.51.10.4

4.92.02.9

17.16.7

10.4

8.53.25.3

21.41.6

19.8

4.7 3.5 3.4 7.7 0.4 -3.8

0.0 -4.2 2.2 -1.1 0.5 -2.6

How to finance net borrowing requirements

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Thank you very much

Prof. Francisco LiñánUniversity of Seville

flinan@us.es