Exporters avoid Covid and inflation by assuming part of the rise in labor costs
The foreign sector is being a key fact sheet that explains the resilience that the Spanish economy has shown to the energy shock and the inflation crisis aggravated by the war in Ukraine. According to the latest available national accounting figures, lExports of goods increased by 2.6% in the interannual rate in the third quarter of last year, when the GDP stopped dead to advance just 0.1%. At the same time, tourism is close to pre-pandemic levels, since until November the country had recovered 85% of the arrivals of international travelers and 94% of the spending they made in 2019, according to the INE Frontur survey.
In the absence of the latest data relating to the end of the year, Spain could have dismissed in 2022 its eleventh consecutive year with a current account surplus (the difference between exports, including tourism, and imports) despite the enormous uncertainty that has hit the Eurozone and the rest of the major economies in recent quarters. That The dynamism of the foreign sector has been a constant since 2012 and confirms the transformation that the national economy underwent as a result of the financial crisis and the cuts and sacrifices that this entailed.
Between 2012 and 2021 the export sector increased sales of goods abroad by 40% in nominal terms, the strongest increase among the five largest economies in the Eurozone (Germany, France, Italy, the Netherlands and Spain). This would have been the case, to a large extent, thanks to the fact that the cost-competitiveness conditions of Spanish exports have remained propitious, as Ramon Xifré, associate professor and research director at ESCI-UPF, points out in an article published in the ‘ Funcas Economic Information Notebooks.
In fact, export costs have barely increased on average by 2% when compared with other economies in the region, when in the same period the unit labor costs of the Spanish economy rose slightly more than 10%. Xifré points out that exporters have probably partially contained export costs, without transferring all the increases they have registered in order to gain or maintain their cost/price competitiveness abroad.
Taking the most recent data, those of the first three quarters of last year, as a reference, it can be seen how the good export dynamics persists. Thus, Spain is the second economy among the five main ones in the euro with the greatest year-on-year rise in monthly exports, which were accelerating their growth month by month. In a context in which the euro depreciated sharply against the dollar due to the more aggressive rate policy of the Federal Reserve (the common currency even lost parity with the greenback) sales of Spanish companies to non-EU markets grew double than those carried out within the EU in five of the first nine months of 2022.
Neither inflation nor war have eroded competitiveness
In addition, and despite the blow caused by inflation, which peaked at 10.8% in July and stood at 5.7% in December, there are no signs that price pressure could significantly harm to foreign competitiveness, according to the expert who recalls, yes, that Spain’s exports are still underrepresented within the block of the five largest economies in the euro in relation to GDP. “It cannot be affirmed that in the first three quarters of 2022 the cost-competitiveness conditions of the Spanish economy have eroded significantly,” says Xifré, adding that, up to now, they have maintained the favorable domestic conditions that have partly supported the expansion of exports since 2012.
In principle, the fact that Spain has managed to register more moderate inflation rates than its partners in recent months (December was the second in a row with the lowest level in the entire Eurozone, according to Eurostat) would have helped the country to gain competitiveness; the reduction in the energy bill thanks to the ‘Iberian exception’ or cap on gas would also have contributed to this. The National Institute of Statistics (INE) publishes this Friday the first preview of the GDP for the fourth quarter, which will already offer a faithful picture of the behavior that the foreign sector registered in the whole of the year.