Our comprehensive assessment of Spain's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Spain, as well as the latest industry developments that could impact Spain's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Spain before your competitors.
Spain Country Risk
Spain's economy will return to growth in 2014, due to steady export growth and the progress made on corporate deleveraging. However, a more balanced recovery will be restricted by Spanish household's lack of progress paying down their debts, with much more pain ahead for Spanish consumers.
Spain's current account surplus will grow to 2.3% of GDP in 2014, as the country begins re-orientating its increasingly competitive goods exports back to its main trading partners in Europe. Although robust tourism will keep the current account in positive territory for the foreseeable future, inefficient use of these sustained surpluses will limit Spain's long-term growth potential.
Although Spain's budget shortfall will continue shrinking over the next few years, overly optimistic revenue and spending projections will contribute to the...
Spain Industry Coverage (18)
BMI View: Â Livestock prices have held up relatively well in the EU despite the impact of Russia's embargo, and Spanish pig carcass prices remain elevated compared to other EU producers, while pork exports further afield are going from strength to strength. We therefore expect to see continued growth for Spain's most important livestock commodity. Grain producers will be feeling less positive after a sharp drop in yields for wheat and barley and a fall in corn acreage due to irrigation concerns. We do not expect this to have any effect on livestock production , as other EU producers have enjoyed a strong harvest and will be looking to export feed grains. The dairy sub-sector is adapting to a new legislative framework under the EU's milk package , which could lead to greater stability, although the...
BMI forecasts an 11.9% increase in vehicle sales in 2014. This comes from an expected 9% increase in the passenger car segment and 29.3% rise in commercial vehicle (CV) sales.
BMI forecast 9% growth in passenger car sales in 2014 on the back of the extension of the vehicle scrappage scheme buoying sentiment and pent-up demand from sustained declines in recent years, despite the country's weak consumer story dampening demand for big ticket purchases.
BMI forecast 30% growth in the LCV segment and 25% growth in heavy truck sales in 2014. We expect the country's construction and manufacturing sectors to remain lacklustre, but we believe that pent-up demand in the segment will help buoy the sector over the year.
BMI forecasts vehicle production in Spain to increase 8.6% in 2014. This comes from an expected...
Defence & Security
Spain Defence & Security
BMI View: Â In our view, Spain faces low security risks in terms of international conflict, interstate conflict and criminal activity. The country's high scores in our security risk ratings are bolstered by Spain's friendly relations with international states and European neighbours as well as its decreasing involvement in Afghanistan.
BMI predicts that Spain will spend USD14.8bn on defence in 2014. Up to and including 2018, we expect Spain to spend on average USD14.2bn annually on defence. We expect a decline in defence spending in 2015 to USD14.2bn, and then to USD13.9bn the following year. The final two years of the forecast period could see Spanish defence spending increasing to USD14.2bn and USD14.5bn in 2017 and 2018 respectively.
We have given Spain an overall security risk rating of 82 for Q414. On average, the...
Food & Drink
Spain Food & Drink
BMI View: We believe Spain's government will relax austerity as the 2015 parliamentary elections approach (see 'Reform Momentum On Hold Until, March 27), damaging perceptions of sovereign credit risk. This view appears to playing out, with the government recently agreeing to cut income taxes by an average of 12.5% by 2016, and corporate taxes from 30% to 25%. This could help relieve constrains over households' purse strings but our view remains that deleveraging still has some way to run, meaning that consumer spending (and demand-pull price pressures) is likely to remain subdued for some time to come. This means more sluggish growth for the food and drink sector, while the lower end of the sector will continue to outperform the rest. In line with this, we believe that Dia is one of a select few Western Europe-based food retailers with good near-term growth prospects in the...
Spain Freight Transport
BMI View: The worst is over for the Spanish economy, and consequently its freight sector. Following years of contraction across freight modes, there were signs of recovery in 2014, and we expect volumes to continue on this upward trend in 2015. We caution however that the freight sector remains overly reliant on export demand, particularly from Spain's main eurozone partners, many of which are not in rude health themselves.
Headline Industry Data
Air freight volume is set to grow by 1.6% to reach 597,800 tonnes in 2015. Medium-term growth (to 2019) will average 2.1% per annum.
Tonnage handled at the port of Algeciras will grow by 6.60% to reach 103.17mn tonnes, with medium-term growth averaging 5.8% per annum.
Boxes handled at the port of...
BMI View: Spain's construction sector is expected to post positive growth in 2015 following seven years of recession. The recovery will be gradual however, with the government's precarious fiscal position and a fragile economic recovery both weighing on the industry. Housing and rail are expected to be the key drivers of growth, with limited investment in the power sector anticipated owing to sharp policy changes.
Spain's construction industry has suffered a severe and extended recession - losing an estimated EUR62.5bn in industry value between 2008 and 2014. However, we anticipate growth will return from 2015, with 1.7% real construction industry value growth anticipated. Over our 10 year forecast, growth is expected to remain in positive territory, picking up pace over the coming years to average 2.5% per year between 2015 and 2023....
BMI View: Spain is, and will remain, a classic example of a country where development of premiums obscures a number of positive trends. Both the non-life and the life segments are mature and competitive. Premiums have stopped shrinking, thanks to the stabilisation of the economy. However, they are unlikely to grow through the forecast period. Particular groups, which are already well established, will increase their businesses via acquisition and/or innovation in terms of product development or distribution. For the leaders, the market remains profitable. Some will continue with plans to expand into foreign markets. All should have access to all the capital that they need.
Like its counterparts in other countries in Western Europe, Spain's insurance sector is one where premiums are unlikely to grow -either in USD or EUR terms - through the forecast period. Nevertheless, trends are favourable....
Spain Medical Devices
BMI Industry View: Â The Spanish Â medical device market ranks fif th in Western Europe (WE) but per capita expenditure is low by WE standards. Most of the market is accountable to the public sector, which has be en particularly affected by cost-containment measures Â in the National Health System (SNS - Sistema Nacional de Salud) Â since the impleme ntation of Royal Decree Law 16/2012, impacti ng medical device expenditure. We forecast low market growth...
BMI View: The outlook for Spain's metals sector is steadily improving once more. After three years of consecutive contraction in both domestic steel consumption and production, BMI is forecasting a turnaround with steel production returning to growth in 2014 and steel consumption in 2015 (after a contraction of 0.5% in 201 3 ). Looking further ahead, we expect both steel consumption and production growth to accelerate year-on-year (y-o-y) from 2016 through to the end of our forecast period in 2018 , with production levels to hit 14,291mnt (mm tonnes) and consumption to reach 11,868mnt by that date . Â
Despite the forecasted gains, we believe economic growth in Spain will prove...
Oil & Gas
Spain Oil & Gas
BMI View: Â Although current domestic production of oil and gas is negligible, with imports meeting around 98% of current demand, we are witnessing a gradual but notable uptick in investment targeting Spain's upstream. The acceleration of onshore and offshore activity could cut Spain's hefty import bill, but there are political and regulatory risks that hold sizable downs risks to both conventional and unconventional efforts. However , the environment ministry has recently allowed deepwater drilling off the Canary Islands , and the Supreme Court has granted Repsol the authoris ation to start exploration after the permit had been legally challenged by local authorities. Also, in November 201...
The Spanish petrochemicals industry is witnessing a solid recovery following a period of a sharp and prolonged downturn. Strong export growth will be crucial to the revival of the sector, but the industry will not get back to previous levels of production due to permanent plant closures in recent years, according to BMI's latest Spain Petrochemicals Report.
The Spanish petrochemicals industry shows signs of strengthening growth, returning to around 2010 levels amid a recovery in export markets and, to a more limited extent, domestic markets. In H114, the chemicals production index grew by an average of 3.6% year-on-year (y-o-y), while the rubber and plastic index grew by an average of 4.5%; this follows growth in 2013 of -1.0% and 1.5%, respectively.
In view of improved market performance, we have raised our chemical production growth forecast from 2.0% to 4.3% while we have maintained...
Pharmaceuticals & Healthcare
Spain Pharmaceuticals & Healthcare
BMI View: Â Despite the Spanish economy returning to growth in 2014 and picking up steam heading into 2015, we believe that the country ' s pharmaceutical sector will not follow suit until 2018. Regardless of calls made by companies for the implementation of a system that adequately rewards innovation and supports investment in future medicines, the government will likely continue with its cost containment measures by targeting the healthcare sector and patients as it tries to reduce its expenditure on prescription drugs, creating a challenging environment for drug companies operating in Spain.
Headline Expenditure Projections
Pharmaceuticals: EUR24.09bn (USD31.79bn) in 2013 to EUR23.11bn (USD30.97bn) in 2014; -4.0% Â in...
BMI View: Â Spain's electricity market is struggling in the face of a new regulatory environment and a sluggish economy. Keen to cut costs, the government has reduced renewable energy subsidies, but it risks the wrath of providers who invested in the market expecting high returns. Recently, US company NextEra filed a complained making it the fourth official complaint of this kind. In June 2014 the Government approved a retroactive policy to replace feed-in tariff in an attempt to bring down the rate of return on renewable investments from 20% to 7.5% Â The new formulas and tables to be used in the renewable industry poses significant threats to the industry's growth. This is reflected in our new estimates with a 11% reduction in the long term growth of the solar and wind power generation industries....
BMI View: Â Our view that renewable energy expansion in Spain would slow significantly is playing out, as just one wind turbine was reportedly installed in Spain during the first half of 2014. The regulatory environment for renewables remains extremely challenging for those companies operating in the industry , and domestic utilities continue to be hit hard.
A number of regulatory changes over 2013Â and the beginning of 2014 have rocked Spain's renewables industry. Coupled with the country's depressed economic picture, these reforms have dented investor confidence and created difficulties for renewable energy operators.Â
Recent developments include:
The Spanish Wind Energy Association announced in July 2014 that just one wind turbine was installed during the first half...
BMI View: Â The trend towards consolidation continues apace in Spain, with TelefÃ³nica closing a deal for Digital+, following Vodafone's acquisition of Ono and rumours surrounding Jazztel and Yoigo as possible targets. The larger players are facing massive investments in 4G and fibre as Spain moves to next-generation networks . However, weak consumer demand and fierce competition has caused a significant drop in prices, as smaller companies such as Yoigo make an impact. C onsolidation is therefore an attractive concept for the larger players, reducing the overall level of competition in the sector and acquiring additional resources. The early returns on these...
BMI View: BMI's Spain tourism report looks at a range of key indicators in this well established European tourism destination. Spain already has one of the largest inbound tourism markets in the world, benefiting from relatively low travel costs from key source markets and a very well developed transport and accommodation infrastructure netw ork. As economic growth in the e urozone stabilises, we are forecasting steady growth in arrivals to Spain, alongside a gradually improving outbound travel market, leading to increased tourism related expenditure and improved industry value by the end of the current forecast period in 2018.
Spain's tourism industry was heavily impacted by the global credit crunch, with some of its key source markets such as Germany, the UK, France and Italy experiencing limited economic growth or indeed economic declines which...
BMI View: In spite of the tepid economic recovery and the ongoing demands for independence from the Catalan region, we have maintained our forecasts and continue to expect overall extraction and consumption levels to fall due to the dual effect of rising environmental awareness, shrinking household budgets and limited extensions of existing water networks due to lack of funds and an incoherent, under-regulated sector.Â
Spain's economic recovery will remain unbalanced in 2014 and 2015. Real GDP growth is likely to remain overly dependent on netÂ exports, while household spending remains tepid. This is reflected by a lack of inflationary pressures in the country. This is continuing to act as a deterrent for potential investors and constricting the maintenance and modernisation of the water and wastewater services, as the government is overstretched and reliant on private sector and foreign...