The Effects of Globalization on the Economy of Spain
Jump to Comments
Globalization has had a significant economic impact on the country of Spain. It has affected imports, exports, GDP, employment, per capita incomes, income distribution, and other economic factors. Over the past years, Spain’s amount of both imports and exports has increased. The GDP has grownrapidly in past years but the growth rate is now beginning to slow down. Employment has greatly decreased. Per capita incomes increased greatly, but like the GDP growth rate, their growth rate is slowly down. For the most part this impact has been a positive one. Spain has experienced a large amount of economic growth in the past years due to globalization. Its opening of its economy, technologicaladvances, and its joining of the European Union, have all contributed to this economic growth.
International trade and financial flows are important to the economy of Spain. In 2007, Spain’s exports were estimated to account for $256.7 billion and imports were estimated to account for $380.2 billion.1 Main exports included machinery, motor vehicles, foodstuffs, pharmaceuticals, medicines, andother consumer goods.1 Main export partners were France, Germany, Portugal, Italy, the United Kingdom, and the United States.1 Main imports included machinery and equipment, fuels, chemical, semi-finished goods, foodstuffs, consumer goods, and measuring and medical control instruments.1 Main import partners were Germany France, Italy, China, the United Kingdom, and the Netherlands.1 Spain had atrade deficit of $123.5 billion. From 2004 to 2005 exports increased 2.5% and imports increased 7.9%.2 Spain has become the 16th largest exporter over the past years.3
In 2005, Foreign Direct Investment (FDI) inflows for Spain were €18,485 billion.2 FDI inflows, from 2003 until 2007, accounted for 2.8% of Spain’s GDP.4 The FDI outflows in 2005 were €31.777 billion meaning that the total net outflowswas €12.692 billion.2 This means that Spain was investing more money in foreign businesses than foreign countries were investing in them. The European Union followed by the United States and then Japan were the largest investors in Spain.3 The service sector has been the main recipient of the FDI inflows, the second being the industrial sector.3 Spain is particularly appealing for investment dueto its government policies, technological and infrastructure reforms, and growing economic openness.3
Spain’s decision to join the European Union greatly advanced its economy. The adoption of the Euro has kept interest rates down and has lowered the cost of financing.4 This has allowed for Spanish companies to branch out and invest abroad. Spain has vastly increased its investments abroad.Companies are expanding and buying out other foreign businesses. Spanish companies like Mango, Zara, Satander, Ferrovial who are quickly building global business empires are examples of this.4 Spanish companies are acquiring other businesses in Latin America and in Europe.4 Some are branching out to America, Eastern Europe, and Asia.4 Spain has $87 billion invested in Latin America and thiscontributes to 7% of its listed companies’ earnings.4
While GDP and per capita incomes have increased over the years, unemployment has increased over the past years. The agricultural and industrial sectors have experienced strong reductions in employment.2 Manufacturing jobs have quickly started drifting towards Eastern Europe where labor is much cheaper.4 Spanish companies are also expanding abroad andoutsourcing which contributes to an increasing unemployment rate. Spain has one of the highest unemployment rates in Europe.
In the future, economic growth is expected to slow down. The trend has already started to occur. Spain’s economy was vastly strengthened by joining the European Union and by opening its economy but the benefits of those actions are coming to an end.
Spain is expected to...