Industrial Production Growth Analysis: Spain's Economic Shift

Industrial Production Growth Analysis

Developments in Industry

Stress Analysis of Industrial Production Growth from 3 Aspects:

• Respect to the Overall Economy
• Regarding Environmental Factors
• Domestic Demand Considerations

Since 1985, the contribution of the industry to economic growth has significantly decreased, reflected in its reduced participation in the Gross Value Added (GVA) at current prices concerning employment (see Table 2, p. 168). From this perspective, the industry no longer plays the central role in Spain's economic development that it did in the 1960s, when its presence in GDP increased significantly, consolidating the industrialization process in Spain.

However, this does not mean that the Spanish economy is experiencing deindustrialization, as its weight in GVA has decreased by only 2 points in real terms over 20 years.

Industrial production efficiency is generally higher compared to services and agriculture. However, cyclical swings have been more intense, revealing a heightened sensitivity to impacts (supply or demand) or a greater contribution to these oscillations. Progress is faster in upturns and more pronounced in recessive stages.

Some of the stronger demand shocks originate from external oscillations resulting from the growth of neighboring economies. These have occurred due to the reduction of foreign trade barriers, affecting the industry most, as it is more exposed to foreign competition. Similarly, some of the most frequent supply shocks, such as higher wages, increased service prices, currency appreciation, or rising oil prices, may affect the industry more intensely.

The growth rates of industrial output in the 1960s and early 70s were on firmer ground, resulting from the existence of a sophisticated competitive framework created to integrate Spain into a united Europe.

The weight of manufacturing exports, which increased slowly since 1985, has accelerated over the last decade, doubling and surpassing domestic demand. Imports, which had hardly changed before 1985 due to protectionist measures, have also increased.

Increased internationalization of the industry is evident in the growing importance of exports and imports relative to the GDP ratio, reflecting the flow of trade in goods and services.

A comparison with the economies of the geographic and economic environment, particularly those also belonging to the European Union, reveals Spain's strong industrial growth, but also highlights a significant lack of competitiveness.

The growth of manufacturing production and domestic demand must be assessed to determine its impact on the balance of foreign trade. Spain's incorporation into the EU has led to a greater increase in domestic demand than in production, causing a substantial increase in import volume and reducing the level of self-sufficiency. This has resulted in a shift from a surplus until 1985 to a widespread and growing deficit.