Fri, Oct 12, 2001 page18

• Spain achieving high economic growth rates

  OVERSEAS INVESTMENTS Spain's integration in the world's global economy and the openness of its structures, reflect an increasingly higher amount of direct investment abroad by Spanish companies and entrepreneurs. Action taken shows the flexibility of the system.

  • SPANISH CHAMBER OF COMMERCE
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  Spain's GDP was increased by four percent last year totaling around US$520 billion, making it one of the world's leading countries in terms of the size of its economy, the eight largest in the OECD and sooner or later deserving a place among the group of richest countries (G-7).

  The structure of the Spanish economy is that of an industrialized country, with the services sector being the main contributor to GDP, followed by industry. These two sectors represent almost 90 percent of Spain's GDP with agriculture's share today representing less than five percent of GDP and declining sharply as a result of the country's intense econo-mic growth.

  

  Spain is a very dynamic country, and has traditionally achieved very high economic growth rates, well above the average for other industrialized countries. The growth in Spain last year was approximately 17 percent higher than the estimated average for the EU.

  PHOTO: SPANISH CHAMBER OF COMMERCE

  Spain is a very dynamic country, and has traditionally achieved very high economic growth rates, clearly above the average for other industrialized countries. The growth in Spain in 2000 was approximately 17 percent higher than the estimated average for the EU. The prospects for the coming year are that Spain will maintain growth rates of nearly 3.5 in 2001, once again exceeding the average for the EU.

  Inflation in Spain has fallen steadily since the late 1980s. The average inflation rate for 1987 through 1992 was 5.8 percent. The rate of inflation was kept under five percent for the first time in 1993, and has been further reduced to levels under three percent in subsequent years. In 2000 the inflation rate had been contai-ned under three percent.

  Recently consumer price inflation stands at four percent, among other reasons, as a consequence of the surging oil price, and the euro depreciation. How-ever, underlying inflation had drifted down again to close to 2 percent in April 2000. Also, in 1999, Spain engaged in an earnest effort to reduce the budget deficit, including a successful program of major privatizations and of contention of public expenditure. The actions taken have once again proved the flexibility of the Spanish economy. According to government projections, zero percent budget deficit will be achieved this year and subsequent years. Finally, very noteworthy is the impressive reduction in the official interest rates in Spain from 10 percent in 1993 to the current 4.75 percent.

  Foreign trade, investment

  In recent years, Spain's exports and imports have grown rapidly, as has incoming foreign investment. The basic features of the country's balance of payments today include a trade deficit which is being completely financed by the surplus in the services account (driven by tourism) and in the capital and financial accounts.

  Despite the strong volume of foreign direct investment that Spain receives, Spanish direct investment is since 1997 larger than foreign direct investment in Spain. In addition, Spain is among the world's leading countries in terms of official reserves, ahead of the US, France, Italy and Canada.

  Spain's exports include vehicles, nuclear reactors, boilers, electrical machinery and equipment, fuels and mineral oils, plastics and plastics products, edible nuts and dried fruits, cast iron and steel, pulses and vegetables, cast iron products, chemical products, pottery and furniture. The sophistication of the products exported clearly shows the degree of technology and capability of Spain's economy.

  In 2000, Spain's main trading partners were EU countries, with 71.3 percent of total exports and 63.86 percent of total imports. The most striking feature of the Spanish balance of payments is the net inflow of foreign investment, consistently received by Spain since 1996. It is also remarkable that portfolio investment has increased considerably since 1997.

  In the 1990 to 1999 period Spain was the sixth EU country in terms of foreign direct investment. Additionally, the profitability index of Spain was the highest in Europe in 1999. Recently, Spain was ranked as the ninth country in the world in terms of its attractiveness for foreign investment, ahead of countries such as Japan and Australia.

  Foreign direct investment is mainly routed to services (58.5 percent in 1996-2000) and industry (40.1 percent). The industrial sectors that received most investment were, among others, the automobile, chemicals, iron and steel, food and beverages and electric equipment industries. Among services, the financial and insurance sectors are predominant. However, other sectors such as electronics, aeronautics, environment, healthcare and leisure offer attractive investment opportunities for foreign investors.

  Particularly noteworthy is the substantial amount of investment in Latin America, where Spain appears as the second world's largest investor in the region, and ranking in the first places in the most attractive countries as Peru, Argentina, Brazil, Venezuela, Dominican Republic, Cuba and Chile.
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