The Economy of Spain
The Spanish Miracle: A Brief Economic History of SpainFollowing the conclusion of the Spanish Civil War in 1939, the economy of Spain, after years of war and destruction, was in ruins. After the war, and up until 2008, the economy progressed greatly, particularly between the years 1959 and 1974. During these 15 years, the rapid economic recovery and unprecedented economic growth experienced by Spain came to be known as the “Spanish Miracle.”
The Spanish Miracle that occurred during the middle of the 20 century was spawned by reforms developed and implemented across many business sectors. Spain’s technocrats, “a new breed of politicians who replaced the old Falangist guard”, put in place policies developed in Spain under the guidance of the International Monetary Fund. These policies, which of course had the approval of the Spanish Dictator Francisco Franco, essentially became blueprints for development in the country—blueprints that turned out to be highly successful. During this time period, as Spain joined the industrialized world, the country boasted the world’s second-highest economic growth rate, after Japan, and became the ninth-largest economy in the world.
The Spanish Miracle can be attributed to growth in many business sectors, but leading the way were gains in infrastructure development and tourism. As the country became increasingly industrialized, public investment in infrastructure increased dramatically. People flocked from their rural homes and farms to settle in the nation’s cities and formed a new class of industrialized workers. This led to even more unplanned building, primarily on the periphery of several major Spanish cities, to accommodate the new workforce.
With hundreds of manmade and natural attractions in Spain, tourism also began to flourish in the 1960s. In fact, by 1970 the tourism sector accounted for 10 percent of the country’s GDP.
The Spanish Economy TodayAlthough the Spanish Miracle, or economic boom in the country, would finally come to an end in 1974, due largely to the international oil crisis of the 1970s, the economy continued to experience gradual growth each year. This would end, however, in 2007/2008 with the bursting of the housing bubble and the global economic crisis.
The prolonged and very deep economic crisis in Spain has illuminated several economic disparities in the country, such as the high debt levels of the private sector, the growing account deficit, overvalued real estate properties and the inflexibilities of the labor market. The crisis has also led to a worsening of the public deficit, though lower than many neighboring countries, and highlighted the strengths of the banking system, which had long indicated the need for alterations to the financial system.
Strengths of the Spanish EconomyAlthough currently mired in recession and experiencing high unemployment rates, the economy of Spain, according to experts, continues to have many strengths which have proven to be a basis for further growth. These strengths include:
Diversified Economy with a Strategic Geographical Location
Spain boasts one of the most open and global economies in Europe. Moreover, it retains an advantageous economic position in Latin America and North Africa. Spain is home to 38,000 small and medium companies (SMEs), many of which export their goods regularly to these regions.
According to statistics, the Spanish economy is invested in regularly by other nations; ranking seventh in that category among other countries. Moreover, its multinational companies generate 10 percent of employment and added-value products. Spain is also third worldwide in terms of investing in foreign countries with respect to its GDP (60%)—investments focused in regions with a high potential for growth, particularly in Latin America, where Spain is second only to the United States in terms of investments.
Strong Multinational Companies in Multiple Sectors
With respect to turnover and market capitalization, several Spanish companies, across multiple sectors, are ranked among the largest European firms. Examples of Spanish companies doing well in this regard include:
- Telefonica—ranked in the top 3 in the ICT sector
- Santander and BBVA Compass—both ranked in the top 5 in the financial sector
- Repsol—ranked in the top 3 in the oil and gas sector
- ACS—ranked top three in infrastructures
- Iberdola—ranked in the top 5 in the energy sector
A Modern Infrastructure
Over the past two decades, Spain has invested heavily in infrastructure, including highways, rails, airports and seaports. The country’s highway network, covering over 13,000 km, is one of the largest in the world and has increased by more than 20 percent between 2006 and 2010. Also worthy of note is Spain’s development of a crucial network of high speed rail lines (approximately 1,600 kilometers) and its major air transport infrastructure, serving nearly 200 million passengers last year alone. Lastly, Spain’s 46 ports place the country near the top internationally in terms of its handling of port traffic.
Spain invests heavily in education, and currently nearly 40% of the young adult population (25-34) has at least some form of tertiary or post-secondary education. This places the country 4 percentage points ahead of the average EU-15 countries, thanks in large part to internationally-renowned scientific training and several prestigious business schools in the country. In fact, Spain is home to three of the top twenty business schools in the world and ranks third in that category only behind the United States and United Kingdom. Despite the skill-level of the workforce, labor costs in Spain are 30 percent less than the Western European average.
The Major Economic Sectors in SpainTourism
Tourism is the largest and most profitable business sector in Spain, accounting for 10% of GDP and employing 2.5 million people. Moreover, there are multiple business types within that sector (hotels, restaurants, entertainment venues, etc.) that rely on tourism for their survival. In terms of the number of visitors each year, Spain ranks third worldwide and second internationally in the amount of money spent per visitor.
Nearly 13 percent of Spanish energy needs are covered by renewable energy sources (sun, water, wind, etc.). Currently, the renewable energy sector in Spain is responsible for creating nearly 120,000 direct and indirect jobs and more than 4,000 companies of varying sizes and activity. Some of these companies are recognized globally for their operating capacity and production technology.
Spain’s Aerospace sector is the fifth-largest in Europe in terms of sales and jobs, employing nearly 40,000 people. The largest sub-segments in terms of production in this industry are airplanes and airplane systems (70 percent of all production), followed by engines (11 percent), equipment (10 percent) and other (9 percent).
Spain’s automotive sector employs approximately 9 percent of the Spanish working population. The industry has a major influence on the Spanish economy, and the country is the second-largest automobile manufacturer in Europe and the eighth-largest in the world. In 2010, nearly 2.4 million automobiles were manufactured in Spain, 87 percent of them for export.
Key Facts about the Spanish EconomyBelow are just a few key facts to keep in mind with regard to the Spanish economy:
- Spain has the 5 largest economy in Europe.
- Prior to the economic crisis in 2008, Spain’s economy was seen as one of the most dynamic economies in the European Union, attracting significant amounts of foreign investment.
- Foreign trade accounts for nearly half of the Spanish Gross Domestic Product. Major Spanish trading partners include Germany, France, Portugal and Italy.
- According to the World Economic Forum’s Global Competitive Report for 2011/2012 Spain ranked 36th out of 142 countries in competitive performance.
- In the 2012 “Doing Business Report,” published by the World Bank, Spain ranked 44 out of 183 countries. It gained 28 places in the category of “paying taxes” but dropped 11 places for “registering property” since 2011.
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