The Club of Spanish Exporters and Investors, the employers’ association that brings together companies with international activity, warned last week that the loss of dynamism in the foreign sector (despite setting a record, Spanish exports fell 4% in the second quarter in relation to the previous one, according to the advance of the National Accounts recently published by Statistics) could anticipate a period of significant slowdown in the Spanish economy. The GDP comes from advancing 0.4% between April and June, less than what had been initially estimated, and despite national and international organizations such as the Bank of Spain, AIReF, the IMF, the European Commission or the OECD , among others, have improved their prospects for Spain this year, all agree in pointing out a slowdown in activity in the second half and focus on that sector.
Several factors in particular suggest that the rate of growth of exports will be rather moderate in the coming quarters. ORIOL Carreras and Judit Montoriol, Economists from Caixabank Research, cite three to ‘Information’: The Waning of the Strong Contribution of the TOURISM SECTOR, Having Already Completed Its Recovery Process, Weak Demand from Our Main Commercial Partners, and the Appreciation of the euro. In this sense, their forecasts contemplate a slightly negative contribution from the foreign sector to GDP growth in the second half of 2023.
He agrees that the foreign sector will cease to be the main engine of growth in the second part of the year Raymond Torres, director of the situation of Funcas, who affects this newspaper in how the key will be in the behavior that the internal demand registers and in its ability to take over from the external sector from now on. “Disinflation could facilitate a slight improvement in the purchasing power of households, and therefore a slight recovery in consumption, but a slowdown seems likely,” the economist points out.
It seems a fact that exports of goods are weakening, their growth being less and less in the accumulated of the year. The main cause lies in the cooling of the European markets, especially in Germany. The German central bank itself stated on Monday that the economy of the European locomotive is going through a “phase of weakness”, after activity stagnated between April and June. German GDP has already contracted by one tenth in the first three months of the year, for which reason the Bundesbank warned that activity in the largest European economy by size is likely to remain paralyzed in the third quarter.
The European Union in general and the euro zone in particular are the main market for Spanish exports, so that sales to our community partners represented 63.3% of the total registered in the first semester, according to the Report Foreign Trade Monthly published last week, so the expected weakness for the region will have a foreseeable negative impact on national exporters.
There is no competition problem
Torres highlights how exports of services, tourism and non-tourism, partially offset the deterioration that has been registered in recent months in goods. In addition, he emphasizes that imports tend to fall, which allows the external balance (in current balance terms) to remain positive. On the other hand, “our results clearly improve the European average, which shows that there is no problem of competitiveness”, he assures.
During 2022 and throughout the first quarter of 2023, Spanish exports had presented a very positive and practically generalized behavior, although that of tourist services stood out, in particular. These data have given way to a situation of weakness between June and September when, in terms of volume, exports from Spain set back a significant 4.1% QoQ, dragged down by exports of goods (-5.9% compared to the first quarter). . In contrast, exports of services remained practically flat (-0.3% quarter-on-quarter), although tourism services posted positive growth rates (1.5%).
The effect of inflation persists
Both Carreras and Montoriol highlight the fact that in nominal terms, the drop in exports of goods was even greater (-8.0% quarter-on-quarter) due to the decrease in the deflator, which in their opinion reflects the moderation of inflation after the strong increases of the previous quarters. All in all, they explain that the price of exports is still high compared to pre-covid levels, since the export deflator between April and June was 22.4% above the level it registered at the end of 2019 and It already chains half a year of quarter-on-quarter falls.
At the same time there was also a decline in imports (of 1% quarter-on-quarter between April and June), but since this decline was less than that of exports, the foreign sector subtracted 1.4 percentage points from the growth in GDP in that period. The experts from CaixaBank Research recall that this data contrasts with the “significant” contribution of the foreign sector to the national economy in the first quarter of the year, which rose 1.3 points.