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Tuesday, May 24, 2022
HomeLatest NewsRising energy prices threaten to end a decade-long surplus in the Spanish...

Rising energy prices threaten to end a decade-long surplus in the Spanish foreign sector.

The protracted golden decade of the Spanish foreign sector could end this fiscal year. Exporting companies are facing new shocks in a more convulsive business cycle than anticipated: rising energy prices, logistics bottlenecks, changes in value chains. And as a consequence of all this, an inflationary spiral, unseen for more than 40 years in high-income countries, is engulfing economies looming with the specter of stagflation as the third month of the war in Ukraine approaches.

The Spanish foreign sector, which has once again lit the fuse for a new upsurge, may face a fruitful situation of export surges, opening up markets and consolidating the permanent presence of companies with an international vocation. We must not forget that Spain ran a current account surplus for a long decade after facing the largest financial holes in its external balance in the first decade of this millennium. Sales for the first time in history exceeded the milestone of 300,000 million euros (namely 316,609) in 2021, when the diversification of goods and services made in Spain was restored outside European borders – their destination is predominant – and in which companies with more than 4 years in a row income from abroad was close to 60,000; in particular, 59,193 companies, according to the census of the Secretary of State for Commerce.

The scenario is overshadowed by inflation of 8.4% in April, leaving the consumer basket and payments for electricity and fuel well above wage growth, which is still moderate and contained. Or, to put it another way: inflation is imported and prices distort foreign accounting.

This is how they begin to see it from various learning services. CaixaBank indicates that Spain’s trade balance has already deteriorated between January and February with an accumulated deficit of 10,775 million euros, almost four times more than in the same period last year. Its experts attribute this to the electricity bill, which increased sharply over the two-month period to 6.985 million “in the context of a strong recovery in imports and import prices,” although the balance of non-energy goods also worsened, with a hole of 3,790 million, in contrast to the surplus in 260 million a year earlier.

BBVA emphasizes that the increase in activity in Spain at the beginning of 2022 has expired. GDP growth in the first quarter, according to the National Accounts lead, was 0.3%, which is notably less than 2.2% compared to the previous period. last year. Although they attribute this small increase to external demand, which contributed 1.5 points and improved all expectations, as well as investment, which corrected the fall in private consumption by 2.3%. If they didn’t behave like this, “the economy would collapse,” they say.

At the same time, the quarterly report of the Bank of Spain warns of inflation, which is expected to rise to an average of 7.5% per year, as this will cause “adverse consequences for foreign competitiveness, activity and employment.” While indicating some transition, as prices are forecast to “moderate” to 2% in 2023 and 1.6% in 2024. tourism can offset the drop in sales of goods and merchandise.

Including because world trade also does not radiate cheerfulness. According to the IMF, it will rise by 5%, less than half of last year’s figure of 10.1%, during which a third of the world’s population was still incarcerated. For 2023, the Fund foresees another, softer landing – up to 4.4%. In other words, on the brink of paralysis, since, in multilateral terminology, any rate close to 3.5% of world trade dynamism brings the recession phase closer.

The leadership, therefore, seems to be revolving around finding a formula that will allow the foreign sector to survive 2022. They recognize that the year that we will live through is dangerous, but which, if the barrier is overcome, can increase its status as a structural section of the Spanish economy.

“Undoubted Consequences” of the War

The Exporters’ Club recognizes the “undoubted consequences” of the war in the foreign sector. Spain, say in this lobby of companies with an international vocation, purchased goods worth more than 1,500 million euros from Ukraine, especially food, 62% of the total, and exported 682 million (chemicals, cars and machinery) in 2021 , while it imported more than $6 billion from Russia (of which fuel accounted for 80% of the total) and sold $2 billion 200 million.

The direct damage will be reflected in the “fall in trade with both countries” and in the necessary replacement of grain, oil and gas in the face of scarcity due to the consequences of the war and sanctions. But there will also be indirect ones, in the form of supply chain shortening, rising energy prices and delays in international transportation, with double-digit inflation, which will reduce the competitiveness of exporting companies and, therefore, reduce the dynamics of GDP.

To weather the storm of 2022, the foreign sector, especially its SMEs, “needs to rethink its protocols and strengthen its legal security to soften the impact of sanctions on Russia” and deepen geographic diversification to reduce risks and take advantage of market niches. business stemming from a hole that Russia left in some countries such as Turkey,” club sources say, distancing themselves from hypothetical deglobalization. On the contrary, military conflict and a pandemic show “how interconnected the world is and its high dependence” on trade, investment and geopolitics, although this “will shorten value chains and gain greater autonomy through the promotion of local production.”

However, Raul Minges, director of the Spanish Chamber Research Service, argues for a “more moderate impact” of the war on Spain’s foreign sector. Given that Russia accounts for 1.8% of our imports and 0.7% of exports, and Ukraine for 0.5% of our purchases and 0.2% of sales, according to 2021 data, in his opinion, the consequences “are not due to so much the size of the economy involved, but also their role as major producers of certain basic commodities such as oil, natural gas, nickel, aluminium, palladium or cereals.” In addition, this “new shock comes when global supply chains have not yet returned to normal following the Covid-19 outbreak,” exacerbating the supply problems that have already plagued an important part of industrial fabric.

The chamber’s forecasts point to an increase in exports in 2022 of about 11.5% year on year. Because of the still strong, albeit smaller, growth in the EU and because of the consolidation of the depreciation of the euro against the dollar, which could be extended if US rate hikes are more aggressive than in Europe, Minges says, and, therefore, give a boost to the foreign sector and increase the competitiveness of its products.

Cámara España believes in the resilience and commitment of foreign firms to transformation in the face of global instability and uncertainty that could paralyze certain investments. In short, in the quest for internationalization: 58% more established companies in their overseas activities than in 2011, and more competitive in terms of goods and services, as well as in terms of structure and price. “Reconversion and space exploration are two key levers to overcome the crisis through prudent inflation management.”

The war will subtract trade flows – the WTO has just reduced them to 3% – but globalization “has no way back and is not going to stop, although it will be reconfigured.” That’s why Minges is also joining the council on market diversification during the reset of the international economic order, which stems from the “need to secure destinations such as sources of supply of raw materials or moving at least part of production for depreciation.” excessive dependence on foreign states in strategic industries. It also points to the shrinking of supply chains, their regionalization and new inventory policies to have minimum stocks and stocks.

Antonio Merino from Repsol’s research department explains that “with all precautions and always depending on the dynamics of global GDP and by region, we can be optimistic about the Spanish foreign sector at this stage of recovery and growth.” […] given our lower import elasticity compared to the EU as we factor in less foreign value than they do in our purchases.” And also on other “many variables”, which reveals better performance compared to competitors in the Eurozone; for example, in terms of value added in exports, in the share of re-exported resources, or in “no loss of labor competitiveness and the beneficial effects of product market reforms.

According to Merino, the expected recovery in mobility and tourism in 2022 points to a foreign sector that “will continue to drive growth” and which he recommends understanding initial losses that “regulatory, fiscal and climate change policies of the past two years” should not be understood. only as restrictive because continuing his path would “increase the length and intensity” of the current business cycle.


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