After Spain’s recent economic challenges reduced the demand for goods at home, local firms have turned their attentions abroad.
The latest figures reveal that Spain is digging its way out of serious economic troubles. The gross national income is expected to shrink by 1.8 per cent this year, and unemployment has risen to 24 per cent. Among people 25 or younger, the figure exceeds 50 per cent.
Spain’s situation is, however, very different from that of Greece, which is experiencing an even deeper crisis. The foundation of Spain’s economy is also stronger and more comprehensive.
Spain is leaving behind a period of economic growth, which was fuelled particularly by the construction industry. The construction boom began in the 1990s and continued until the financial crisis of 2008. Real estate prices, which rose quickly, have now dropped, and are expected to decline further.
This is not good news for troubled banks, which will most likely have to make downward adjustments on their property values. In recent days, conversation has centred on whether or not Spanish banks will need capital injections from the government to survive the situation.
The sharp rise in unemployment has caused public debt to grow. New Prime Minister Mariano Rajoy’s centre-right government has begun making cuts to public finances in order to reduce the deficit.
The government has to measure savings carefully, so that the tightening of the country’s belt won’t undermine future economic growth.
As demand at home dwindles, more and more Spanish companies have turned towards export markets. The structural and quantitative development of local exports reflects the development that has taken place in Spain since the 1980s. The agriculturally oriented country has systematically renewed and diversified its manufacturing industries.
Wines and vegetables remain important exports, but more products requiring manufacturing have emerged alongside them. Machines and gadgets now make up a fifth of Spain’s exports. Cars occupy nearly as large of a fraction.
In recent years, leading global companies in their respective fields have emerged in Spain. The country’s largest commercial banks, Santander and BBVA, are internationally notable. Telecommunications provider Telefónica and energy company Repsol have strengthened their positions domestically and in Latin America. Inditex’s Zara clothing shops, meanwhile, are well known around the world. Spanish construction businesses and chemical industries are strong as well, and the country is a world leader in technologies pertaining to wind and solar power.
Thriving industries are visible in Spain’s air cargo traffic; its main hubs are Madrid, Barcelona and Zaragoza. Large volumes of products are also taken to the Canary Islands by air.
”Textiles, shoes, products from chemical industries and food products including ham, honey and olives are important air cargo exports” says Anja Pöyhönen, Finnair Cargo’s area director for Europe & Russia.
Finnair transports cargo to Madrid, Barcelona and Malaga, as well as to the Canary Islands on charter flights. Of the goods leaving Spain, the majority continue their journey onward from Helsinki – mainly to China, Japan and South Korea.
Among the products shipped to Spain via air cargo are electronics from the Far East and medical products from India. In terms of volume, Spain is an important country in Europe for Finnair Cargo. Despite the financial crisis, demand for air cargo has remained strong.
”The country’s exports are thriving,” Pöyhönen says.
Text by Matti Remes
Photo by iStockphoto
Published May 23, 2012
Category: Market updates