Focus on Spain (IBR 2013)
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Focus on Spain (IBR 2013)

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Drawing on data sources such as the Grant Thornton International Business Report (IBR), the Economist Intelligence Unit (EIU) and the International Monetary Fund (IMF), this short report considers the ...

Drawing on data sources such as the Grant Thornton International Business Report (IBR), the Economist Intelligence Unit (EIU) and the International Monetary Fund (IMF), this short report considers the outlook for the economy, including the expectations of 400 businesses interviewed in Spain, and more than 12,500 globally, over the past 12 months.

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    Focus on Spain (IBR 2013) Focus on Spain (IBR 2013) Presentation Transcript

    • Focus on: Spain Grant Thornton International Business Report 2013
    • Focus on: Spain Introduction more than 47 million people GDP Spain is an advanced economy of more than 47 million people. In 2012, its GDP was aproximately approximately €1trn (US$1.35trn), making it €1 and the 13th largest economy in the world, trillion the fourth largest in the eurozone. in 2012 Drawing on data sources such as the Grant Thornton International Business Report (IBR), the Economist Intelligence Unit (EIU) and the International Monetary Fund (IMF), this short report considers the outlook for the economy, including the expectations of 400 businesses interviewed in Spain, and more than 12,500 globally, over the past 12 months. José María Fernández Managing partner Grant Thornton Spain T +34 91 576 39 99 E josemaria.fernandez@es.gt.com www.grantthornton.es Fourth largest more than economy in the eurozone 47 million people Fourth largest economy in the eurozone GDP aproximately €1 trillion in 2012 more than 47 million people Four large econom in the euro GDP aproximately €1 trillion in 2012 Focus on: Spain 2
    • 12.2% Focus on: Spain 11% 59.4% 6.6% hedge funds, and mutual funds 5.4% 5.4% 5.4% 25.9% unemployment Over 60 of our mem top c operate in fina rate Export destinations (2012) 16.9% France 11% 11% despite considerable efforts to diversify – and a dramatic increase in exports 6.6%6.6% following a 59.4% internal devaluation painful 59.4% which should see the current account 5.4% 5.4% climb into surplus in 2013. by Wall special purpose vehicles 6.6% 59.4% The Spanish economy has endured a tough few years of economic contraction, rising government debt, harsh fiscal austerity and 12.2% 12.2% soaring unemployment. However there have been more encouraging signs in recent months including the end of the recession, the stabilisation of the labour market, a return to growth in the eurozone – which remains a key export market fund administrators, 11% 5.4% Economy asset managers, 12.2% Germany 10.9% 57.4% Italy Portugal 7.7% 5.4%5.4% Other 7.1% Key Indicators • the economy expanded by 0.1% in Q3 from the previous quarter, up from -0.1% in Q2 bringing a two-year recession to and end • exports increased by 6% in Q2 from Q1 (9.2% year-on-year) whilst imports climbed by 5.9% (3.1% year-on-year) • strong merchandise trade and tourism helped Spain record a current account surplus of €1.4bn in the first half of 2013, the first time this has been achieved since records began in 1990 • merchandise export earnings rose by 9.4% in January-July compared with a year earlier, with net foreign earnings from tourism up by 4.7% • the cumulative current-account surplus in the three months to July was €6bn or 0.6% of GDP • the unemployment rate stood at 25.9% in the third quarter, down from a record 27.2% in the first quarter. Import originations (2012) 11.7% France 12.0% 6.8% 63.8% 5.7% Germany Italy China Others Source: Economist Intelligence Unit (2013) Focus on: Spain 3 growth of Italian of Italian
    • % Focus on: Spain 1.3% 11% in 2013 0.2% 6.6% 59.4% 5.4% Economic outlook forecast growth in 2014 5.4% Ranked in Australia remains a key trade partner General government net debt (% GDP) Spain Despite climbing out of recession in Q3, the Spanish economy is expected to contract by 1.3% in 2013, returning to growth of just 0.2% in 2014. The recovery is expected to be slow and unspectacular with expansion of less than 1% per annum expected in the period 2015-18. 31% 1.3% 1.3% 0.2% 0.2% 60% forecast growth of our member firms’ in 2014 Australia25.9% France Spain organisations as recognised by Wall Street top clients operate in financial services France 110% Spain 87% 92% Italy One of the ‘large six’ hedge funds, 81% Italy revenues of $300m 89% 103% France the top 6 Italy Any deterioration in market sentiment Continuing fiscal austerity, the collapse 2008 in Spain or the wider eurozone of house prices and weak domestic is a major downside risk to this forecast. demand continue to weigh on growth. Some of the housing, construction, The budget balance is forecast to shrink 62% consumer indebtedness and banking from -7.1% in 2013 to in major and -6.7% in 2014 markets imbalances have been corrected but back within the EU target range of -3% the outlook remains difficult. House by 2018. Meanwhile net government debt global Combined prices remain 35% below their 2007 peak. is forecast to peak at 92% of GDP in 2017. Around 60% of the funds from the 2012 The unemployment rate is expected to banking sector bailout remain unused remain elevated over the forecast period, 2013 and government borrowing rates have peaking at 26% in 2014 before dropping dropped in recent months so the hope slowly to reach 22% by 2018. in financial is that Recent strong export performance is servicesthe economy can avoid a sovereign 2012 bailout and the accompanying tough expected to drive growth, with the current fiscal measures. account forecast to move into surplus in 2013 and average 1% of GDP in the global accountancy short to medium-term. Economy expected The share of merchandise exports to 2018 to contract by the EU fell to 63% in 2012, down from Providing services for Economy expected 71% in 2008 and further diversification is asset managers, expected to drive export growth of 2.9% to fund administrators, contract by in 2013, slowing slightly to 1.9% in 2014 in 2013 Source: International Monetary Fund (2013) and 2015. Unemployment and austerity special purpose vehicles will continue to hold down imports which and mutual are expected to contract by 3.9% in 2013 funds Over2013 in and 0.5% in 2014 before returning to forecast growth growth of 1.8% in 2015. countries where in 2014 Spain % to contract by 12.2% 83% 120+ $1.8trn 120+ 1.2 billion inhabitants and growing 400 business our Audit, Tax and interviews 24% 17% gross domestic product and Advisory expect to countries where our professional work together increase Audit, Tax and of businesses investment expect revenue to rise Focus on: Spain 4 10.4 glob We are accou
    • France Focus on: Spain by Wall Street Franc asset managers, ecognised administrators, fund all Street hedge funds, 1.2 billio and mutual funds Over 1.2 billion inhabitants and growin special purpose vehicles Business growth prospects 60% $1.8trn top clients Business optimism in Spain improved dramatically in Q3, climbing from -50% to -10%. While this still means that a majority of businesses are pessimistic, this is the most confident Spanish businesses have been since 2008. The renewed optimism is feeding through into business growth prospects. On average over the past 12 months, net 17% of businesses have indicated an expectation to raise revenues, up from just 3% in 2012. Profitability expectations have averaged just net 2% over the past 12 months but climbed to 14% in Q3, up from 8% in Q2 and 1% in Q1. This is the highest level recorded since the same period in 2011, although it remains well below the eurozone average (26%). Spanish expectations for investing in plant & machinery stood at net 24% in Q3, similar to the eurozone average (25%). 0% 25.9% 400 business Net percentage of businesses expecting an increase (next 12 months) - Q3 2013 member firms’ interviews revenue increase expectrise to investment 17% 26% rate 24% 25% 56% 14% constrained by Talent shortage hampers Source: Grant Thornton IBR 2013 Revenues 24% 17% expect to Net percentage of businesses expecting to hire people (next 12 months) economic investment 10% Investment Spain Eurozone of busines expect reve to rise 5% 56% 0% constrained by -5% Talent economic uncertainty shortage hampers -10% uncertainty Profits growth interviews increase 24% 17%operate in financial services product gross domestic expect to clients unemployment 26% 400 business of our member firms’ of businesses financial services Job creation tends to lag recoveries as businesses work through excess capacity and wait for sustained levels of demand before they make long-term investments in people. With overall and youth unemployment at record highs in Spain, there is also some welcome news for job creation from the IBR data. Hiring expectations climbed into positive territory in Q3 following seven straight quarters of negative data. Net 3% of businesses now plan to hire workers over the next 12 months, the highest level since the same period in 2011. growth -15% -20% Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Spain Eurozone Source: Grant Thornton IBR 2013 Focus on: Spain 5
    • 1.2 billion inhabitants and Focus on: Spain 0% Business growth constraints 400 business With the banking system still recovering and house prices still a third lower than their 2007 peak, the days of easy credit are well in the past. More than half of Spanish business leaders cite a shortage of finance as a constraint on growth (51%) which is slightly above the southern Europe average (47%) and well above that of the wider eurozone (27%). Despite improved export performance, domestic demand remains weak and 48% of business leaders cite a lack of orders/ reduced demand as constraint on their growth plans. This factor has remained fairly stable over the past two years but the 2013 average (49%) is well above that of 2011 (40%). Just over a third of eurozone businesses (36%) cite a lack of demand as a constraint, although this represents a significant decline from 55% at the height of the financial crisis in 2009. By contrast, the proportion of businesses citing bureaucracy (28%) and a lack of skilled workers (10%) are well below the eurozone averages. The comparison with Italy, another mber firms’ lients ancial services Talent $1.8trn Percentage of businesses citing factor as a constraint on growth Continuing economic uncertainty is the greatest constraint on the expansion plans of Spanish businesses. This concern was cited by 56% of business leaders in Q3, down from 67% in Q2. Elsewhere in troubled southern Europe, businesses in Greece (82%) and Italy (58%) are even more concerned. interviews struggling economy in southern Europe, is interesting in this regard: 64% of Italian business leaders cite regulations and red tape as a constraint on expansion plans. This is despite Italy having undergone a much less painful adjustment programme, of businesses perhaps highlighting the advantage of expect revenue Spain’s relatively stable government. 24% 17% gross domestic produ expect to increase investment 56% 42% Economic uncertainty 56% economic 27% Shortage of finance to rise 48% constrained by 51% 36% Low demand 10% 28% 35% Bureaucracy 26% uncertainty Spain Eurozone Lack of skilled workers shortage hampers growth Focus on: Spain 6
    • Focus on: Spain Restoring competitiveness Percentage point difference between Spanish and Italian business expectations A key aspect of the eurozone sovereign debt crisis has been the inability of economies to devalue their currencies to boost the price competitiveness of their goods and services. However, as a consequence of severe austerity measures and low levels of economic activity, economies such as Spain have gone through a painful internal devaluation, lowering wages and selling prices relative to their competitors. Due to an increase in productivity and a decline in wages, Spain’s unit labour costs dropped by 2.3% in Q2-2013 compared with the same period twelve months previously. Since their 2009 peak, unit labour costs have fallen by 10% in Spain. This compares with Italy where labour costs have risen by almost 5% over the same period. Falling wages have given businesses the space to lower prices. Over the past four years a majority of Spanish businesses have indicated plans to reduce selling prices. Across 2013, net -11% have indicated an expectation to cut prices. This compares to 11% across the eurozone and 14% in Italy, giving a significant boost to the competitiveness of Spanish output both at home and abroad. The consequences of this approach are broadly positive in terms of the external sector. The number of exporting businesses in Spain has increased by 28% since 2007. Merchandise exports are up by 20%, with a greater share going outside the EU. The IBR highlights this increasing confidence: net 39% of Spanish businesses expect to increase exports over the next 12 months, compared to 26% in Italy and across the eurozone. The downside of the internal devaluation in Spain has been felt domestically. Over the past 12 months, 18% of businesses in Spain have shed workers – an unhappy trend that has continued since 2009. Over the same period, 4% of businesses in Italy have hired workers, rising to 10% across the eurozone. Tellingly, the unemployment rate is now touching 27% in Spain – more than double the rate in Italy. This rises to 57% of young people in Spain, considerably higher than the rate in Italy (40%). Falling wages and rising unemployment have reduced the amount of money Spanish people have to spend. The resulting decline in demand for imports has improved the current account balance, but private consumption is expected to decline by 2.9% in 2013. Levels of consumption are expected to pick up thereafter but are still expected to be 3.5% lower in 2018 compared with 2010. 25% Exports 20% 15% 10% 5% 0% -5% -10% -15% -20% Prices -25% 2007 2008 2009 2010 2011 2012 2013 Net percentage of businesses reporting an increase in people (last 12 months) -18% 4% Spain 10% Italy Eurozone Source: Grant Thornton IBR 2013 Focus on: Spain 7
    • IBR 2013 methodology The Grant Thornton International Business Report (IBR) is the leading mid-market business survey in the world, interviewing approximately 3,300 senior executives every quarter in listed and privately-held businesses all over the world. Launched in 1992 in nine European countries, the report now surveys more than 12,500 businesses leaders in 45 economies on an annual basis, providing insights on the economic and commercial issues affecting companies globally. The data in this report are drawn from interviews with chief executive officers, managing directors, chairmen and other senior decision-makers from all industry sectors in businesses with 100-499 employees. Q3 data is drawn from 3,300 interviews globally (100 in Spain) conducted in September 2013. 2013 data is drawn from over 12,500 interviews (400 in Spain) conducted between November 2012 and September 2013. To find out more about IBR, please visit: www.internationalbusinessreport.com. Dominic King Grant Thornton International Ltd Global research manager T +44 (0)207 391 9537 E dominic.king@gti.gt.com Maria Ruiz Grant Thornton Spain Communications, Marketing and BD Director T +34 91 576 39 99 E maria.ruiz@es.gt.com © 2013 Grant Thornton International Ltd. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. www.gti.org CA1311-04