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Back to 2013, perspectivas económicas

J. R. Pin Arboledas , IESE Professor, University of Navarra, Spain

2013 economic outlook

Tue, 29 May 2012 09:03:01 +0000 Published in The Business Gazette

The future is here. Investors have discounted 2012, the Spanish Economics will decline by 1.7% of its GDP or more. The first quarter declined 0.4% of GDP and another 0.3% decline is expected in the second quarter. Therefore, the third and fourth quarters will decline by -1% or more between them. Assumed: 2012 will not bring us joy. Hopes are pinned on 2013, is that so?

What are the data to take into account when predicting what 2013 will be like? Those that make up the overall demand of a Economics: internal (private and public) and external consumption, investment (public or private) that is financed by savings (internal or external). What can we expect from them?

Internal public consumption will most likely decrease. The Government wants the public deficit to be 3% by the end of next year. How? By reducing public expenditures and increasing VAT to ensure that goal, not to spend more. Private consumption does not seem to be activated either: first, salaries are frozen, if not reduced; second, the VAT increase does not favor consumption; third, the fall in real estate prices and the stock market holds back consumption by reducing the feeling of wealth; fourth, because credit would be needed for consumption; difficult with banks with liquidity problems; at least, during all of 2012 and part of 2013, until they digest the financial reform. Conclusion: little pull from internal consumption.

External consumption, exports depend on the global Economics and how Spanish companies respond to its pull, if any. In principle, their demand will grow. On the other hand, the adaptation of Spanish companies to the foreign market, which is good in large companies, requires a change in SMEs. In 2013, will the Spanish Economics be purely export-oriented? No, but the trade balance will improve. However, we have tourism, an export without leaving home, which is not expected to grow much if the same happens as this year, having amortized the effect of the Arab Spring. Conclusion: there is something to expect from foreign consumption and tourism next year, but it will not be something to shoot rockets.

That leaves investment. Public investment will follow the path of expense. We will see in the 2013 budgets. Not much can be expected from it, except that it does not correspond to the Spanish Administrations, but to the EU through the EIB (European Investment Bank). Spain will have more than 85% of public debt over GDP, we will not be able to ask for much more. Foreign savings will not come in unless the risk premium skyrockets. It will depend on the capacity of credit , which we have already seen that in the interior will not be much and our external credit is exhausted. So? Investment should be encouraged by the EU, through the EIB or other mechanisms such as a Marshal II Plan, which I have already order in other articles.

In summary the prospects for 2013 depend on our European diplomacy and exports, what do you think will happen?