The Competitiveness of the Spanish Economy in the Euro Area: some explanations for an ambivalent evolution

Transcription

1 The Competitiveness of the Spanish Economy in the Euro Area: some explanations for an ambivalent evolution Ramon Xifré ESCI Universitat Pompeu Fabra CompNet Workshop, September 2012 (Paris)

2 Introduction Competitiveness is widely considered a key economic policy priority, particularly in the European Union and the Euro Area. However, beyond its prominence, there is no univocal concept of the competitiveness of an economy but two main approaches: (a) price-cost competitiveness and (b) external competitiveness. In the case of the Spanish economy, headline indicators of both notions have evolved in opposing ways since 1999 wrt EA: there has been real appreciation together with an increased export share. The purpose of the paper is to provide a bird's-eye view on several facts that may partially explain this dual behaviour. Relevance for policy making: which is the best way to close the Spanish competitiveness gap? 2

3 Price-cost and external competitiveness , index 1999 = Real Effective Exchange Rate (REER) vis-a-vis the rest of EA, based on ULC for the total economy. Source. European Commission (DG Ecfin.) Germany Spain Italy Germany Spain Italy Share in Euro Area world exports; merchandise trade, current prices. Source. Eurostat (Comex). 3

4 Partial explanations Low productivity growth High export growth Demand side (1) Domestic demand growth model (3) Emerging markets biased export growth Supply side (2) Interaction of firm-size effects (4) Product quality upgrading 4

5 Explanation 1. Domestic demand growth model Domestic and external demand contribution to real GDP growth Average annual growth Average annual growth GDP Domestic External GDP Domestic External Germany 1.6% 0.8% 0.8% 0.7% 0.9% -0.2% Italy 1.6% 1.7% -0.2% -1.1% 0.0% -1.1% Spain 3.7% 4.9% -1.2% -0.6% -2.7% 2.1% Source. Eurostat. Spanish growth model pre-2008 relied heavily on domestic demand, particularly in the bubble in the construction sector; this needed large credit inflows and a long, severe deleveraging process is under way. It also detracted domestic resources (human, financial) from other, more productive activities and tradable sectors. This explains aggregate productivity low growth. 5

6 Share in value added Explanation 2. Interaction of firm-size effects Does the poor aggregate performance result from widespread, micro inefficiencies? Data on firm heterogeneity and the distribution of firm size suggest it s not the case. Export performance conditional on firm-size Source EFIGE (G4 : Germany, France, Italy, UK) Share of EU s Value Added and number of firms Source Eurostat Percentage of exporting firms 79,2 76,1 65,1 63,5 52,6 51,1 41,440,6 35,533,3 29,3 26,3 24,5 21, >249 G4 Spain 86,2 87, >249 G4 Spain Exports as % of turnover 30% Germany 25% 20% 15% France Italy UK 10% Spain 5% Netherlands Sweden Poland Czech R. Portugal Greece 0% 0% 5% 10% 15% 20% 25% 30% Share in number of enterprises 6

7 Explanation 3. Emerging-markets biased export growth Exports of goods by destination, variation % 185% 150% 100% 107% 88% 145% 125% 103% 84% 72% 113% 50% 0% Germany Spain Euro Area* World Intra-UE27 Extra-UE27 Source. Eurostat (Comext). Note. EuroArea* excludes Germany and Spain. In geographical terms, Spain s export growth in Extra-UE27 markets is remarkable. In contrast, there is no evidence of major changes in the Spanish export specialization structure in broad terms. 7

8 Explanation 4. Product quality upgrading Average relative price (ARP) of Spanish exports ARP of Spanish exports to the world wrt average competitors ARP of Spanish exports to the EA wrt selected individual competitors 1,3 1,23 1,2 1,1 1,0 1,2 1,1 1,0 1,10 1,09 0,9 0,97 0,96 0,94 0,97 0,95 0,9 0, Source: Cuadras, Puig and Xifré (2009) based on UVR analysis on Comext. 0,8 0, ,73 Germany Netherlands France Italy At the disaggregate level (CN-8), preliminary analysis suggests quality upgrading of Spanish products with respect to certain EA competitors from 1999 to

9 Conclusions There has been a marked divergence in the evolution of aggregate indicators of competitiveness of the Spanish economy. Quite specific to Spain but a robust and not unique phenomenon. This dual behaviour is better understood by looking at the micro level: Evidence of a dual population of firms in the Spanish economy in terms of export performance and, probably, productivity growth. Spanish exporting firms over time dispatch mainly the same products in broad terms, target emerging markets and may be moving up the quality ladder. 9