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Successfully investing in Spain

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last updated on 19 May 2021 | reading time approx. 2 minutes

 

 

 

How do you assess the current economic situation in Spain?

Even though the Span­ish eco­nomy was ex­pec­ted to fall the most in 2020 in the Euro zone, both the Span­ish gov­ern­ment and Brus­sels eco­nom­ists see signs of strong growth in 2021.

With a weak­er than ex­pec­ted start to the first quarter of 2021 as a res­ult of the third wave of the Cov­id-19 pan­dem­ic, the Bank of Spain projects GDP growth of 6 per cent in 2021, and 5.2 per cent in 2022, with a re­cov­ery to pre-pan­dem­ic GDP levels in 2023. This is be­low the fore­cast for­mu­lated by the Span­ish gov­ern­ment for 2021, which pro­jec­ted an in­crease of 9.8 per cent for 2021, fa­vour­ing in­vest­ments re­lated to European funds, but not all of which will be avail­able in 2021.

Eco­nom­ic de­vel­op­ment will de­pend, on the one hand, on a func­tion­al vac­cin­a­tion and im­mun­isa­tion pro­cess for the pop­u­la­tion, the evol­u­tion of the pan­dem­ic and the res­ult­ing con­sequences for the pro­duc­tion and em­ploy­ment en­vir­on­ments and on tour­ism as one of the most im­port­ant in­dus­tries in Spain, as well as, on the oth­er hand, the be­ha­viour of house­holds in terms of con­sump­tion and sav­ings. In­creas­ing vac­cine ad­min­is­tra­tion will al­low a gradu­al with­draw­al of move­ment-re­strict­ing meas­ures, so that na­tion­al tour­ism with­in Spain should also ex­per­i­ence strong growth dur­ing 2021.

The un­em­ploy­ment rate is ex­pec­ted to rise from 16.2 to 17 per cent in 2021 com­pared to the pre­vi­ous year, with a large share of youth un­em­ploy­ment (un­der 25-year-olds), which already stood at 40.7 per cent at the end of 2020. On the oth­er hand, this is also a great op­por­tun­ity for Spain, as start­ing salar­ies are much lower than in neigh­bour­ing coun­tries and many new in­dus­tries can be at­trac­ted as Spain of­fers very good in­vest­ment bases due to the cur­rent situ­ation, also with a view to re­du­cing the de­pend­ence on tour­ism and trade in the long term.

 

How would you describe the investment climate in Spain? Which sectors offer the largest potential?

The in­vest­ment cli­mate is gen­er­ally pos­it­ive, even if the cur­rent left-left co­ali­tion can­not be called dir­ectly busi­ness-friendly. It may well be that own­ers of large prop­er­ties will be held more ac­count­able for their taxes in the fu­ture.

However, le­gis­la­tion is largely pre­dict­able, and la­bour law slightly less com­plic­ated com­pared to oth­er European coun­tries such as France, Ger­many or Italy. The gov­ern­ment in of­fice seems to have aban­doned, at least for the time be­ing, its ini­tial in­ten­tion to in­tro­duce cer­tain meas­ures to make re­dund­an­cies due to busi­ness op­er­a­tions more dif­fi­cult be­cause of the Corona crisis.

There is still great po­ten­tial in the re­new­able en­ergy sec­tor, which is sup­por­ted by Span­ish polit­ics, as well as in the IT and com­mu­nic­a­tions sec­tor, where very well-trained stu­dents and low wages also con­trib­ute. In this con­text, one should not lose sight of top­ics such as smart cit­ies and mi­cro-mo­bil­ity, as Spain is very well po­si­tioned in the di­git­al sec­tor and there is no doubt that the pan­dem­ic has be­come a cata­lyst for gen­er­al and also in­dus­tri­al di­git­al­isa­tion.

 

What challenges do German companies face during their business ventures into Spain?

The de­cis­ive factor for suc­cess or fail­ure is primar­ily the se­lec­tion of em­ploy­ees and, more spe­cific­ally, the man­agers of the Span­ish branches. Fur­ther­more, con­trol of the branch in Spain is im­port­ant in or­der to avoid un­pleas­ant sur­prises, which come to light only with the passing of time. In terms of for­eign lan­guage skills, Span­iards have im­proved sig­ni­fic­antly in re­cent years, but are not yet at the level of oth­er European coun­tries. Fur­ther chal­lenges also arise from fur­ther polit­ic­al de­vel­op­ments in Spain.

 

Spain wants to become a central location for the production of electric cars in Europe. What opportunities does this create for the economy?

The auto­mot­ive and auto­mot­ive sup­ply in­dustry is cer­tainly one of the sec­tors that has been very hard hit in Spain in re­cent years. There are there­fore ideal con­di­tions for the pro­duc­tion of elec­tric cars, many well-trained young people as well as already ex­ist­ing in­dus­tri­al in­fra­struc­tures. As sus­tain­ab­il­ity is very im­port­ant in the cur­rent polit­ic­al pro­gram of the left-left gov­ern­ment, pos­sib­il­it­ies of state sup­port are en­vis­aged here. For the eco­nomy, the pro­duc­tion of elec­tric cars in Spain would clearly have a pos­it­ive ef­fect, es­pe­cially in the re­gions where sup­pli­ers and car com­pan­ies have cut back or ended their pro­duc­tion.

 

In your opinion, how will Spain develop?

The most im­port­ant sec­tor for Spain, tour­ism, has been hit hard at its heart, even though open­ings in this sec­tor are slowly be­com­ing no­tice­able. As this sec­tor con­trib­uted about 15 per cent of Spain's GDP be­fore Corona, lift­ing the re­stric­tions on mo­bil­ity is of para­mount im­port­ance for Spain. Fur­ther­more, it is not yet known how small and me­di­um-sized busi­nesses, which have few­er fin­an­cial re­serves, will emerge from the crisis. These firms have so far re­ceived less sup­port from the state than in oth­er European coun­tries. If the in­form­a­tion turns out to be cor­rect and lar­ger state aid is also planned for these busi­nesses, a fur­ther large wave of in­solv­en­cies could well be staved off.

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