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Universita degli Studi di Verona

Sede di Vicenza
Corso di Laurea Magistrale in International Economics and Business
Management

International economics
A.A.2017/2018

Group work:
ANALYSIS OF TRADE BETWEEN SPAIN AND ITALY

Student:
Sirbu Olga
Contents:

I. General characteristic of Spain


II. Trade Balance between Spain and Italy
Part I: General characteristic of Spain
Spain is a country mostly located on the Iberian Peninsula in Europe, with there also being
two large archipelagoes, the Balearic Islands in the Mediterranea Sea and the Canary Islands off
the African Atlantic coats, two cities, Ceuta and Melilla, on the African mainland and several
small islands in the Alboran Sea near the African coast. The country’s mainland is bordered to
the south and east by the Mediterranean Sea except for a small land boundary with Gibraltar; to
the north and northeast by France, Andorra and the Bay of Biscay; and to the west and northwest
by Portugal and the Atlantic Ocean. It is the only European country to have a border with an
African country (Morocco) and its African territory accounts for nearly 5% of its population,
mostly in the Canary Island in Ceuta and Melilla.
With an area of 505,990 km 2 (195,360 sq mi), Spain is the largest country in Southern
Europe, the second largest country in Western Europe and the European Union, and the fourth
largest country in the European continent. By population 46,354,321 (2016 census, 30th), Spain is
the sixth largest in Europe and the fifth in the European Union. Spain’s capital and largest city is
Madrid: other major urban areas include Barcelona, Valencia, Seville, Bilbao and Malaga.
Spain is a parliamentary democracy and constitutional monarchy, with King Felipe VI as
head of state. It is major developed country with the world’s fourteenth largest economy by
nominal GDP and sixteenth largest by purchasing power parity. It is a member of the United
Nations (UN), the European Union (EU), the Eurozone, the Council of Europe (CoE), the
Organization of Ibero-American States (OEI), the Union for the Mediteranean, the North
Atlantic Treaty Organization (NATO), the Organisation for Economic Co-operation and
Development (OECD), OSCE, the Schengen Area, the World Trade Organization (WTO) and
many other international organisations. Spain has a “permanent invitation” to the G20 summits
that occur geerally once a year.
Spain: Key player in the World Economy

1. World’s 14th largest economy and the 5th largest economy in the EU: GDP
worth 1.2 trillion USD.
2. 11th largest exporter of commercial services worldwide and 16th ranked
exporter of merchandise trade in 2016.
3. 2nd country worldwide in international tourist arrivals and in receipts (1st in
Europe). More than 82 million international tourist in 2016.
4. 13th largest economy in terms of accumulated inward FDI stock (556 Billion US
dollars) and 12th in outward FDI stock in the world in 2016.
5. Total population of 46.5 million. 4.4 million are foreign born.
6. 23 of the biggest Spanish companies have entries in Forbes Global 2000
largest companies in the world.
I would like to start my analysis with GDP growth that is an important indicator of the
economic strength of a country. The GDP measures of national income and output for a given
country’s economy. The dynamic of this indicators it’s represented in the next figure, nr.1, where
is showed the GDP constant prices, US dollars and GDP current prices, US dollars from 2005 to
2016 years.

The economy of Spain is the world’s fourteenth-largest by nominal GDP, and it is also one of
the largest in the world by purchasing power parity.

Figure 1: GDP in constant prices from 2005 to 2016 years

Figure 2: GDP in current prices from 2005 to 2016 years


The Spanish economy in the last years, has knewed a positive growth, and grew by 1.6 %.
The average value for Spain during this period was 527.15 billion US dollars with a minimum of
12.07 billion US dollars in 1960 and a maximum of 1634.99 billion US dollars in 2008. In 2016
the GDP in Spain was around 1.23 trilion US dollars. Spain is the fastest-growing country among
the leading Eurozone nations.
Unemployment is often usedUnemployment
as a measure of the health of the economy and is calculated as
rate
a percentage by dividing the number of unemployed individuals by all individuals currently in
the30labor force.
The figure number 2 displays the unemployment rate in Spain from the first quarter of 2005
26.94
to25the fourth quarter of 2016. 25.93
24.19 23.78
21.08 21
20 19.84
17.24
15

10 10.17 9.6
9.03 8.42

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Unemployment rate

Figure 3: Unemployment rate in Spain from 2005 to 2016 years

The crisis led to a dramatic rise in unemployment, which grew to almost 27 % in 2013.
How we can see from the graphic number 2 in the last three- four years the unemployment is
falling ( the unemployment rate decreased to 21 % in 2016), but still maintain high quotas, in
comparison with 2005-2008 years, where the unemployment rate recorderd the lowest level
(8,42 % in 2007).
Improvements in the economic situation filter down to the labour market faster. The labour
reform has produced a paradigm shift in unemployment, which at certain moments during the
crisis climbed to. Youth unemployment decreased below 50 % last year. While a recovery is
clearly underway and the government projects about 500,000 new jobs this year, economists
forecast high unemployment will linger.
Over the last three years, the Government of Spain has been implementing an intense
agenda of reforms aimed at correcting the economic imbalances and laying the foundations for
sustained growth and sustainable well-being, while making employment the highest priority for
this term of office.
 To overcome economic imbalances and recover from the recession, by fostering
competitiveness, overseas activity and entrepreneurship in order to drive growth and
speed up job creation;

 To guarantee the sustainability of well-being and to focus efforts on ensuring the effects
of the recovery to filter down to the people.
The Government of Spain’s determination in its reforms and a commitment from the people
of Spain have enabled confidence to be restored and the process to recover growth, employment
and well-being to begin
Another important indicator in Spain economy is the Inflation Rate, this factor also
influence the GDP growth.
Inflation Rate from 2005-2016 years
5

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-1

-2

Ряд 3

Figure 4: Inflation Rate from 2005 to 2016 years

This graphic shows the inflation rate in Spain from 2005 to 2016. The inflation rate is
calculated using the price increase of a defined product basket. This product basket contains
products and services, on which the average consumer spends money throughout the year.
Though Spain inflation rate fluctuated substantially in recent years, it tended to decrease through
2005-2016 period. In 2016, the average inflation
Government DebtratetoinGDP
Spain decreased by about 0.2 %
compared to the previous year. The inflation rate in Spain reached the highest level of 4,1 % in
2008
120 and a record low of -1,37 % in 2009.
The next index (figure number 5) shows the progression of the national public debt in
Spain.
100

80

60

40

20

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Government Debt to GDP

Figure 5: Spain Government debt to GDP from 2005-2016 years


Spain recorded a government debt equivalent to 99,40 percent of the country’s Gross
Domestic Product in 2016. Government Debt to GDP in Spain averaged 53,36 percent from
1980 until 2016, reaching an all time high of 100,4 percent in 2014 and a record low of 16,60
percent in 1980.
How we can see from this graphic Public debt has increased substantially – from 60,1% of
GDP in 2010 to nearly 99.4 % in 2016. One of the reason for this increase is that Spain is a
victim of the Eurozone debt crisis, and Spain’e economy is battling chronically high
unemployment-particularly the country’s youth ( Unemployment Rate-Figure 3). This fact shows
us that Spain produces and sells goods and services not sufficient to pay back debts without
incurring further debt. Total Investment, % of GDP
The most important, consistent and controllable way to grow an economy is through
improved
35 capital goods structure and growing capital stock, which is where capital investemnets
come in. The next important macroeconomic indicators are Investments and his trend is
represented
30 in the figure 6.

25

20

15

10

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Investment, % of GDP

Figure 6: Spain Total Investments, % of GDP


Spain has the sixth largest FDI stock and is the sixth largest investor in the European Union.
From 2008 until 2014, Spain encountered an austere economic crisis, which made local and
foreign companies relocate to other countries. FDI to Spain have recovered thanks to the country
becoming more competitive and to the increased confidence of investors, 2015 being the first
year with a high GDP in Europe, aligning once again with the economic powers on the continent.
In 2016, flows to Spain increased by almost 50 % reaching US 16.8 billion (in 2015- 11.9 US
billion).
FDI inwards in Spain by Sector
Foreign Direct Investments in Spain by Sector 2013-2016.
Million EURO. Stock and Recent Trends
Sector Stock Investments Flows 2013-2016
2013 2014 2015 2016 2013-
2016
1 Energy 55,398.6 4,371.3 1,013.4 3,715.9 9,347.2 18,447.8
2 Metals and 53,442.2 1,407.3 218.0 453.5 1,305.7 3,384.5
Manufacturing of
other materials
3 Retail and Wholesale 40,951.9 1,073.5 3,844.2 2,839.0 1,557.9 9,314.5
4 Financial Services 38,334.3 3,978.4 2,922.2 2,356.0 7,582.9 16,839.5
5 Real Estate, Building 35,376.0 4,135.7 5,208.5 7,864.2 6,905.7 24,114.1
and Infrastructures
6 Food and Beverages 27,642.1 467.9 1,497.7 1,952.8 1,063.2 4,981.6
7 ITC: 27,434.4 618.1 873.7 609.6 794.2 2,895.6
Communications,
Software & IT
Services
8 Automotive OEM 21,853.6 390.7 94.4 708.5 306.0 1,499.6
&Automotive
Components
9 Chemicals and 19,715.2 301.7 506.2 699.1 322.1 1,829.0
Petrochemicals
1 Pharmaceuticals, 13,699.8 848.8 396.3 451.9 199.1 1,896.1
0 Medical, Healthcare
&Biotechnology
1 Transport and 12,592.9 1,527.7 761.7 947.9 1,320.1 4,557.4
1 Logistics
1 Business Services 11,530.0 434.2 508.1 736.7 690,7 2,369.7
2
1 Industrial Machinery 7,559.4 1,481.1 195.0 91.0 254.2 2,021.4
3 and Equipment
1 Tourism 6,841.1 1,478.5 1,358.6 762.1 819.3 4,418.5
4
1 Mining and Natural 5,913.6 151.7 1,096.8 28.0 76.3 1,352.9
5 resources
1 Environmental 3,149.4 869.7 455.8 12.7 3.4 1,341.7
6 industries
1 Paper, Wood and 3,093.4 172.2 106.4 301.5 199.9 780.1
7 Others
1 Leisure and 2,054.3 175.5 104.0 616.1 113.0 1,008.6
8 Entertainment
1 Consumer Goods 726.9 24.6 7.5 153.3 20.6 205.9
9
2 Other 5.5 16.5 11.0 - 214 241.7
0
Total Productive 347,745. 17,281.7 20,162.1 23,765.9 23,476.1 84,685.7
Investment 5
Total Direct Investment 387,314. 23,925.1 21,179.7 25,299.9 33,095.6 103,500.2
7
Figure 7 : FDI inwards in Spain by Sector
Distributi on of foreign direct investment by sector

0%
1%
18%

36%
11%

9%
3%
4%
19%

Agriculture Extractive industries


Manufacturing industries Energy
Construction Transport and storage
Financial and insurance activities Wholesale and retail trade motor industry
Other activities

Figure 8: Distribution of foreign direct investment in Spain by sector, ( % of total)


Analyzing the data above, we can deduce that the major contributing sector to the Spanish
economy is Manufacturing industries (36 %) and Energy (19 %) . The service sector including
tourism and construction also constitute the pillars of the Spanish economy.

The last two indicators that we analysed are Spain imports and export. Spain’s trade plays a
significant role in the nation’s economy, accounting for more than hals of its GDP. The nation,
has, however, had a trade deficit persistently over the past few years, which stood at $77.5 billion
in 2009.

Trade balance for Spain (US dollars, Billions)

Figure 9: Trade Balance for Spain (2005-2016)


Spain Exports (Trade in USD
Spain Imports (Trade in USD)

In 2016 Spain imported $299B, making it the 15th largest importer in the world. During the
last five years the imports of Spain have decreased an annualized rate of -0.823 %, from $352B
in 2011 to $299B in 2016.
Volume of imports of good and service
10

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-5

-10

-15

-20

Volume of imports of good and service

Figure 10: Volume of imports of good and service (percent change).

The most recent imports are led by Crude Petroleum which represent 6.25 % of the total imports
of Spain, followed by Cars, which account for 6.1 %.
Its top imports are Crude Petroleum ($18.7B), Cars ($18.3B), Vehicle Parts ($16.6B),
Packaged Medicaments ($9.9B) and Petroleum Gas ($6.7B).

Figure 11: Products that Spain import (2016)


The top import origins are Germany ($44.5B), France ($36.6B), Italy ($23.2B), China
($21.3B) and Portugal ($14.6B).
Imports-partners
3.9

4.4
14.7

5.2

6.7

12
7.1

Germany France China Italy


Netherlands UK Portugal Belgium

Figure 12: Countries where Spain does import from (2016)


Volume
In 2016 Spain exported of exports
$275B, making itof
thegoods and service
17th largest exporter in the world. During the last
five
15 years the exports of Spain have increased at an annualized rate of 1.72%, from $286B in
2011 to $275B in 2016.
10

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-5

-10

-15

Volume of exports of goods and service

Figure 13: Volume of exports of goods and service ( percent change)


The most recent exports are led by Cars which represent 12.9% of the total exports of
Spain, followed by Vehicle Parts, which account for 3.61%.
The top exports of Spain are Cars ($35.5B), Vehicle Parts ($10B), Refined Petroleum
($7.89B), Packaged Medicaments ($7.45B), and Delivery Trucks ($5.82B).
Exports-partners
Figure 14: Products that Spain exports (2016)

The top exports destinations of Spain


4.4 are France ($42.68), Germany ($31.8B), Italy
($22.5B), the United Kingdom ($21.2B) and Portugal ($20.1B).
7 15.2

7.6

11.4
7.8

France Germany Italy UK Portugal US Netherlands

Figure 15: Countries where Spain does export to (2016)

In the last twenty years Spain has experienced a period of rapid growth followed by a very
deep crisis. Until 2007, it was named “the Spanish economic miracle”, and after 2008 it was the
country with the highest unemployment rate in the EU amongst many other very serious
problems.
In conclusion, following the analysis of all the data presented above in 2008, Spain was
badly affected by the global credit crisis. The Spanish property market collapsed leading to a
deep recession, that persisted for several years. Since , Spain has seen a sharp fall in GDP.
How we saw in the figure number 3 „Unemployment Rate”, even during the economic boom,
with all improvements, with an intense implementing agenda of reforms, unemployment remains
stubbornly high in Spain, especially youth unemployment.
In July 2012, Spain’s unemployment rate was above 20 %, its stock market was at its lowest
point in a decade, and the government was borrowing at a rate of 7,6%. With domestic demand
depleted and no sign of recovery in sight, President Mariano Rajoy and the European Union
decide to enact reforms to renew credibility in Spain and increase exports from the country.
These reforms can be broken down into three main categories: financial market refoms,
fiscal measures, and labor market reforms. While financial market and fiscal meausres restored
foreign investors’ confidence in Spain, driving down interest rates by over 400 basis points and
increasing Spain’s stock market to record levels, the labor market reforms decreased unit labor
costs by nearly 4%.
Since implementing the reforms, Spain’s exports increased by an average of over 4% at the
same time as exports in Italy and France increased by less than 2 %. Athough not conclusive,
comparing Spain to neighboring countries suggests that the country has been largely successful
in driving an export-led recovery.

Part II: Characteristic of Trade Balance between Spain and Italy


The next index that we analysed are the flows of imports and exports between Spain and
Italy during the 2000-2016 years.
Spain imports from Italy was US $19,99 Billion during 2016, according to the United
nations ComTrade Trade balance
Database between Spain
of International Trade.and Italy (Billion $)
40 Spain exports to Italy eas US $ 22,47 Billion during 2016 year, according to the United
Nations COMTRADE Database on International Trade.
35

30

25

20

15

10

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Imports Exports

Figure 16: Trade balance between Spain and Italy (2000-2016)


Taking a look to this graphic with statistics of Trade Balance, we can see that Trade
balance between Spain and Italy during the 2000-2007 had a considerable continuous increase
(in 2007- Imports was over 34,3 Billion US dollars). Starting with 2008 year, Spain was affected
by the financial economic crisis, causing a huge trade deficit, a loss of competitiveness against
its main trading partners, an above-average inflation rate, house price increases, and a growing
family indebtedness. All these factors affected the Trade Balance of Spain to Italy, leading to a
downward trend (2009, Exports-17,1 Billions US dollars and Imports-21 Billions US dollars).
In the next two years, starting in 2009 to 2011 years, Trade balance between Spain and Italy
had a geart recovery, up to 24,3 Billions Imports in 2011 and Exports over 24 Billions, in
comparison with 2009 this growth is considerable. Starting with 2012 since 2016, the Trade
Balance, along all this period was fluctuating, but the flows remains quite stable.
Spain
Looking to the Figure Export
number 16to
weItaly by that
can see Product Group
the Exports and Imports had a similar
trend,
3.5 the difference is that the amount of Exports is lower than the amount of Imports.

2.5

1.5

0.5

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Animal Vegetable Food Products Minerals


Fuels Chemicals Metals

Figure 17: Exported goods from Spain to Italy by Product Group, 2005-2016 years (Billion US
dollars )

From Figure 17 “Exported Goods” we can deduce that the most exported goods to Italy are
Chemicals. Between 2005 and 2011there has been a dynamic growth in terms of exports: from
1,492 Billions in 2005 to 3,093 Billions in 2011 , this year reached the peak of exports. After this
year the Chemicals Products has been registered a decrease, but it still remains the Product
Group in which there are more exports to Italy.
The second Product Group that has been registered a positive trend till the crises in 2008 are
Vegetables. It’s growth started with 1,67 Billions in 2005 to 2,22 Billions in 2008, after the
crises from 2009 to 2014 the demand of this product has been fluctuated and after 2014 when is
registered the peak of Vegetable exports with 2,91 Billion US dollars, has tended to decrease.
Another relevant Product Group for Spain’s exports is the Metals, that had the first position
in exports from 2005-2008 years, but after the crises has maintained the third position. The peak
of this Product was registered in 2007 with an increase of 2,866 Billion before the crises and in
2011 with 2,772 Billion, after the crises.
For Fuels products we can observe a substantially growth in 2013 and registered the
highest level in his Balance of Trade of 1,261 Billion , after this year has tended to decrease.
For Minerals, Animal and Food Products the exports were maintained throughout the years
at a constant level.
Spain Import from Italy by Product Group
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Animal Vegetable Food Products Minerals


Fuels Chemicals Metals

Figure 18: Imported goods from Italy to Spain by Product Group, 2005-2016 years(Billion US
dollars )
In terms of imports from Italy to Spain, as we can see form the graphic number 18, the
main sectors are certainly Metals and Fuels Products. But after the crises both of this Products,
has been registered a substantially decrease, from the highest level in amount of 4,754 Billion in
2008 to 0,968 Billion in 2015 for Fuels Product, and for Metals the peak of imports was
registered in 2007 with an amount of 4,555 Billion, and tended to decrease till 2,35 Billion in
2016 . Another important industries for Spain imports are Chemicals Product. Starting with the
2005 years, the amount of Chemicals imports was 2,165 Billion , and till the 2016 year was
registered 2,35 Billion US dollars.
Others relevant imported goods are Vegetable, Food Products, Minerals and Animal
Products, that has been maintained at a constant level during the all years.