Economy of Spain

By | April 29, 2022

According to cheeroutdoor, Spain is an industrial-agrarian country with a developed, large-scale and diversified economy. In 2002, in terms of GDP ($796 billion at PPP), it ranked 5th in Western Europe and 13th in the world. GDP per capita – $ 19,400, which is 85% of the average level of the 4 leading European countries. In 1991-2002, in terms of average annual GDP growth (3.1%), Spain was several points ahead of the European average. The decisive factors of economic growth are domestic demand (an increase of over 4% annually in 2000-01), exports (9% in 2001), and an effective state economic policy.

In the sectoral structure, the share of agriculture, forestry and fishing accounts for 4%, industry and construction – 31%, services – 65% (2002). 8% of the economically active population is employed in agriculture, 28% in industry and construction, and 64% in the service sector (2000). The unemployment rate is 12.2% (2.3 million people in 2002), incl. the share of unemployed in the total number of economically active male population is 9.7%, economically active women – 20.5%, among young people – 28.5%.

The industry of Spain is characterized by an increased share of industries working for consumer demand (38.3% of GDP), a relatively lower share of science-intensive products (6%), and significant disproportions in the regional distribution of industry. Three provinces – Catalonia, Valencia, Madrid account for almost 50% of the country’s GDP. The manufacturing industry accounts for 19% of GDP (2001), incl. for the machine-building complex (transport, general, electrical, radio-electronic engineering) 34% of GDP. The main driving force behind the industrial development of Spain is the telecommunications and information technology sector (8% of GDP), the automotive industry (6% of GDP, or over 3 million cars per year, 80% of which are exported, 2001). Unlike the automotive industry, which is almost entirely controlled by foreign capital, in the information and telecommunications sector of the country, the world-famous Spanish TNC Telefonika, which controls 1/10 of the world information technology market, occupies a monopoly position. In general, Spain is among the top ten world manufacturers in a number of indicators of the manufacturing industry (production of cars, machine tools, telecommunications equipment, petrochemical, chemical, textile, footwear – 159 million pairs per year, food and flavor industry). Other sectors of the manufacturing industry stand out: shipbuilding, ferrous and non-ferrous metallurgy, the pharmaceutical industry, the production of building materials and cement (38 million tons). Of the branches of the fuel and energy complex, the oil refining, gas industry, and nuclear energy are characterized by the greatest dynamics. Electricity production – 223 billion / kW / h (2001). The oldest branch of the national economy is the mining industry (less than 1% of GDP and 0.5% of all employed in industry) is represented by enterprises for the extraction and processing of metal ores, coal (23.4 million tons), zinc, copper, tin, tungsten, manganese, mercury (2.5 thousand tons, 30% of world production, 1st place in the world).

In agriculture, 40% of the value of agricultural products falls on livestock and poultry farming, 35% – on vegetable growing, horticulture and viticulture (27.9 million tons in 2001), 25% – on the grain sector. Despite the relatively developed and diversified agriculture, the latter is nevertheless unable to provide the country with such foodstuffs as grain, meat, and dairy products. The main, most competitive types of agricultural products are citrus fruits: oranges (40% of world production, 1st place in the world) and lemons (15%, 2nd place), olives and olive oil (1st place in the world), tomatoes, stone fruit (peaches, apricots, plums) and pome (apples, pears) crops, nuts (almonds). In terms of the size of vineyards, Spain ranks 2nd in the EU (after France), and 4th in the world in terms of wine production. Bananas are also grown potatoes, saccharos (sugar beet and cane), cotton, tobacco. Grain production (wheat, barley, corn, oats) is mainly oriented to the domestic market. Spain is the 3rd grain importer in the world. The only grain that Spain traditionally exports is rice. Animal husbandry is mainly small-scale and extensive. Cattle, sheep, goats, pigs, horses, mules and donkeys, a special stock of bulls for bullfighting, poultry are bred. The production of livestock and poultry per capita in slaughter form is 118 kg. The fishing industry is one of the largest in Europe (1% of GDP). The catch of fish and the production of other seafood per capita – 28.1 kg (2001).

The service sector provides 3.5% of annual GDP growth (2001). Leading sectors of the service sector: trade and public catering (22.5% of GDP), tourism (11% of GDP), monetary sector (7% of GDP).

In 2001, 74.4 million foreign tourists visited Spain (2nd place in the world after France), including 26.2 million so-called sightseers (without overnight stays). Tourism revenues amounted to almost 40 billion dollars (3rd place in the world after the USA, France). 91% of tourists come to Spain from Europe. Departure of Russian tourists to Spain amounted to 221 thousand people. (2001). Tourism revenues cover 136.6% of the country’s negative trade balance, provide employment for 1.3 million people, and have an impact on the development of transport and other industries. The tourism sector in Spain is under the control of the state, which is largely due to the country’s ability to develop the tourism business, the desire to preserve the historical monuments of its culture.

In the Spanish monetary system, there are approx. 150 banks with a total of 17,727 branches and a total of 138,386 employees. (2000). The Central Bank develops and implements monetary policy, taking into account the introduction of the euro in the country. A characteristic feature of the Spanish banking system is an exceptionally high level of concentration and centralization of production and capital. From Ser. In the 1980s, especially after Spain joined the EU, this process intensified even more. The top 4 Spanish banks account for over 60% of the country’s bank deposits. A high level of centralization of capital is also characteristic of Spanish savings banks. In the beginning. 1990s As a result of a series of mergers and acquisitions, two leading savings banks were created, accumulating St. 90% personal savings of Spanish citizens.

The length of motor roads is 663.8 thousand km, incl. paved – 657.2 km (99%). There are 12.5 thousand km of railways (of which 7.1 thousand km are electrified). The main part of the railways belongs to the state company RENFE. By 2004, the process of partial privatization of the company is expected to begin. 80% of import and 70% of export cargo is transported by sea, 1502 sea merchant ships with a total displacement of over 2 million tons. The number of airports is 110 (including private ones), their annual throughput is st. 80 million passengers. Number of mobile phone users 12 million people. (2002), Internet 4.6 million people. (2001).

The Spanish constitution defines the country’s economic model as a “free market economy”, which the public administration “guarantees and protects in accordance with the requirements of general economic development and planning.” At the same time, the state retains exclusive competence in matters of economic policy. It is envisaged that the state will also “regulate free private initiative based on the general economic interests of the country.” The strategic task of economic policy in the 1990s. — achievement of economic indicators of the Maastricht agreements of the EU. Much attention is paid to the development of small and medium-sized businesses, restructuring of industry and the banking sector, including the privatization of individual state-owned enterprises. During 1993-2002, the budget deficit decreased from 7.1 to 1.1%, inflation rate from 11.4 to 3.4%. The public debt is almost $63 billion (2002).

Structural restructuring of industry is aimed at creating knowledge-intensive industries, modernizing production and rationalizing the management structures of crisis industries (textile, shipbuilding, coal, energy, oil refining, ferrous metallurgy) in order to increase their competitiveness, phased privatization of individual state-owned enterprises, reviewing their subsidies in order to increase functioning efficiency. In industry as a whole, the task is to increase labor productivity, improve the quality of manufactured goods, increase the share (by 20-25%) of goods with high added value, eliminate excess production capacity, achieve an optimal ratio of employment and technology by closing obsolete workshops and installations, replacing them with new high-performance types of equipment. The main conductor of industrial policy is the Ministry of Industry, which develops medium-term programs for the development of industry as a whole, as well as individual sectors.

Among the most priority areas of the state economic policy is the development of small and medium-sized businesses, whose role in the country’s economy is exceptionally large. For the share of 97% of companies with up to 50 employees. accounts for 46% of the employed and 60% of the total GDP. Special attention from the state (in terms of tax and preferential incentives) enjoys the so-called. the sector of the public economy is workers’ companies, cooperative labor cooperatives, collective action societies, etc., combining (unlike public and private enterprises) commercial and social functions.

The tax reform was carried out in several stages and was aimed primarily at eliminating the anachronisms of the taxation of the Francoist period. In the course of the reform, the ratio between direct and indirect taxes was brought into greater conformity, the share of the latter decreased by almost 1.5 times; by introducing a progressive scale of taxation, the tax burden of the wealthiest segments of the population increased; landowners and heirs of large fortunes lost tax benefits, a value added tax was introduced (instead of the two dozen taxes that existed under Francoism), a progressive scale of taxation on profits from the business sector, and the system of fiscal inspection and penalties was improved. As a result of a sharp increase in tax collection, their share in GDP increased from 16% in 1975 to almost 37% in 2001.

State budget revenues and expenditures amount to $105 and $109 billion, respectively (2000). 96% of the total budget revenues come from taxes, incl. direct 29.7%, indirect 21%, social fund contributions 39%, property taxes 0.2%. In 2001, the country’s central budget controlled 65% of government spending, compared with 90% in 1975, and without state enterprise accounts and the social security system, only 35%. Decentralization of budget funds and their transfer to the regional level is carried out mainly in the form of targeted subsidies through the Fund for Inter-Territorial Compensations (FMC, established in 1984). The amount of funding for the regions is calculated according to a certain formula and automatically increases every 5 years. The competence of the center is only long-term investments with the right of local authorities (at the level of municipalities) to independently choose the mechanism for financing their investment projects. Along with the decentralization of budgetary funds, there were significant changes in the directions of their spending: expenditures on public administration were reduced (a decrease in the share of salaries of state officials) and on military needs. In the structure of spending budget funds, the bulk (over 50%) falls on social security, health care, education and culture, on public administration 5.5%, on defense 3.2%.

Monetary policy ensured financial stability and coordination of economic policy in strict accordance with the objectives and priorities of structural reforms. At the same time, much attention was paid to the restructuring of the banking sector in the direction of its diversification (increasing the role of foreign banks, investment funds and insurance companies), overcoming extreme isolation and focusing primarily on the domestic market (until the early 1980s, even the largest national banks participated in international transactions amounted to a little more than 1%), reducing direct state control over the financial and credit system, its gradual integration into the EU monetary system. With the creation of a single EU internal market (1993), the last restrictions on the free movement of capital were lifted. In particular, the entry of Spanish securities to international financial markets was liberalized, legislation was adopted allowing credit transactions between residents and non-residents, residents were allowed to open accounts abroad, the national currency became fully convertible. The only restriction that remains for non-residents is that they cannot invest in sectors of the “national interest”: railways, radio, television, and the military industry.

The main priorities of social policy are the fight against unemployment, education, healthcare, and social security. In 2001, public spending in the social sector amounted to 16% of GDP (against 8% in 1975). The social security system is represented by a single and 5 special regimes (for agricultural workers, miners, the economically active population, civil servants and the military), covering 95.5% of the country’s population. 2/3 of the social security system goes to the payment of social income (old-age pensions, disability pensions, accident insurance payments, etc.), 50% of these payments are old-age pensions. Sources of social payments: budget financing and contributions to the social insurance system (66% of total social spending), incl. business contributions (85%), workers’ contributions (15%). Pension payments (for old age) and unemployment benefits account for more than 55% (14.5% in 1975) of the total amount of social security funds. Along with a relatively high average pension (60-100% of the average wage), an annual increase in the minimum pension, a mechanism for indexing pensions (at the beginning of each financial year) depending on the growth rate of consumer prices has been introduced, the controllability of the pension system has been increased, the State Council for the Affairs of the Elderly was established, coordinating the activities of the relevant regional departments, engaged in the development and implementation of gerontological plans. The influence of private pension funds, despite the high dynamics of their growth, remains insignificant so far. They cover 20% of the economically active population of the country, and the amount of funds accumulated by them is 5%.

The healthcare system is predominantly public. The share of public spending on health care is 7.4% of GDP (2001). The administrative and organizational functions of managing the system at the federal level are assigned to the National Institute of Health, which works in close cooperation with both the majority of its subordinates and independent regional health authorities. By taking on 83% of health care spending, the government has significantly strengthened the prestige of the state health care system, ensured a high quality level of public health services and free access to them for 99.5% of the country’s population. At the first stage of clinical treatment, patients pay only 40% of the cost of drugs, chronically ill 10%, pensioners are completely exempt from paying them.

Foreign economic policy is aimed at developing exports, diversifying its commodity and geographic structure, and reducing the trade balance deficit. The share of Spain in world trade rose from 1.6% in 1975 to 4.4% in 2001, incl. for export from 0.7 to 1.9%, for import from 0.9 to 2.5%, respectively. Export of goods $ 111 billion: agricultural raw materials and food account for 19%, semi-finished products – 40%, finished industrial goods – 41% (of which science-intensive products – 8%, 2001). Imports $144 billion. Almost 60% of Spanish imports are agricultural and food products, raw materials, energy and technologically sophisticated engineering products. The main items of engineering exports (21% of the total exports) are vehicles (cars, ships and ship equipment, machines for light and food industry, equipment for nuclear power plants). Among the goods of export specialization of Spain are oil products (6% of world exports), products of ferrous and non-ferrous metallurgy, food and flavor, light and footwear industries, building materials, cement. In imports, the share of science-intensive products, oil and oil products, chemical goods, metals and products from them, softwood lumber, food (10%), incl. grain (30% of all food purchases). Main trading partners: EU (approx. 70% of foreign trade turnover); developing countries (18%), incl. Latin American countries (9%); USA (5%); China and Japan (3%); countries of Central and Eastern Europe (4%), including the Russian Federation (1.6%).

One of the main problems of Spanish foreign trade is a chronic trade deficit ($30 billion in 2001). Despite the accelerated growth in commodity exports, the export coverage ratio of imports tends to decrease. In 2001 it was 74% against 80% in 1995.

The inflow of foreign direct investment into Spain is $36 billion (2001), and the volume of accumulated foreign direct investment is $160 billion (2001). Main investors: EU (approx. 70% of the total) and the USA (17%). The volume of accumulated direct Spanish investments abroad is also large – $ 160 billion, of which 60% are in Latin America, 35% – in the EU. The negative balance of payments on current operations is 19 billion dollars (2001), the state external debt is 90 billion dollars (1997).

In 2000, Spain’s exports to the Russian Federation amounted to 0.7 billion dollars, imports – 1.6 billion dollars; St. 80% is oil and other commodities. Compared to 1995, the annual influx of Spanish capital investments into the Russian economy has more than doubled; the total amount of accumulated Spanish investments in the Russian Federation is approx. $100 million (2000).

Economy of Spain