MACROECONOMIC PERFORMANCE

Macroeconomic Performance and Strategic Decisions



Macroeconomic Performance and Strategic Decisions

Introduction

This paper summarises the findings for specific countries and critically analyses current data and information in the light of decisions relating to the internationalisation of business. Three countries have been included in the analysis from three diverse economy types. Spain has been chosen as the large industrial economy within one of the triad markets; Netherlands has been chosen from small open economy; and Brazil has been chosen from the non-triad emerging economy.

SPAIN - Macroeconomic Analysis

Summary of Macroeconomic Performance

Spain entered the 21st century with a modern European economy. Over the previous three years the Spanish economy had consistently grown at a faster rate than those of the rest of the European Union (EU). The economy began to deteriorate rapidly when the country's housing bubble collapsed and a large fiscal debt was accumulated. Real GDP contracted by 3.7% in 2009 and fell by another 0.2% in 2010 (EWP, 2011a). Spain, which was in a strong fiscal position at the beginning of the recession, saw its budget deficit rise to an unsustainable 11.2% of GDP in 2009 (EWP, 2011a).

Real GDP contracted by 0.2% in 2010 and growth of just 0.8% is expected in 2011. Exports should remain strong, in line with partner country demand, but domestic demand will improve only gradually. A full recovery is not expected to begin before the second half of 2012. Driven by higher energy prices and indirect taxes, inflation is edging upward and exceeds the European average. Prices are expected to rise by 3.0% in 2011. Spain's unemployment is more than twice the EU's average (Euro Monitor, 2011a). The jobless rate reached 20.1% during 2010 and will ease slightly in 2011 to about 19.4%.

In 2009 24.1% of Spain's working population was engaged in industry (including mining, manufacturing, energy and construction), contributing 26.9% of GDP. The automobile industry was responsible for 17.5% of the country's exports. By 2010, 71.7% of the Spanish working population was engaged in the services sector, which included transport, tourism, financial services, education, health and social services. The sector accounted for 69.6% of Spain's GDP. Spain's savings ratio has risen rapidly since 2007. In 2010, it amounted to 18.1% of disposable income and the same is forecast for 2011. Consumer expenditure per capita fell by 0.7% in real terms in 2010 and is forecast to decline by another 2.4% in 2011. In 2010 it amounted to €13,632 (Euro Monitor, 2011a).

Summary of International Trade Performance

The share of exports in GDP was 17.5% of GDP in 2010, up from 15.1% in 2009. The EU accounted for 68.2% of all Spain's exports in 2010 and 58.3% of imports in 2009 and 2010. Spain's main export markets are France, Germany and Portugal. Producers of machinery and transport equipment are the country's main exporters (EWP, 2011a). In 2010, this sector claimed 34.5% of all exports. Within the sector, producers of passenger cars are most important, accounting for 18.7% of total exports.

Exports rose by ...