The Diplomat
Foreign companies in Spain foresee a “clear improvement” in their activity in 2021, in aspects such as investment, workforce, turnover and exports, after the unfavorable outlook for 2020.
This is one of the main conclusions of the 13th edition of the “Barometer of the business climate in Spain from the foreign investor’s perspective”. The publication, carried out jointly by ICEX-Invest in Spain, Multinacionales por marca España and IESE’s International Center for Competitiveness, gathers the assessment and importance given by more than 830 foreign companies to the business climate in Spain.
For the Minister of Industry, Trade and Tourism, Reyes Maroto, “all indicators show that 2021 will be the year of recovery and the foreign sector will be key to economic recovery” and stressed that “for the Government it is a priority to support the internationalization of companies, especially SMEs, and facilitate a favorable business climate for investment, as contemplated in the Third Action Plan for Internationalization 2021-2022 that is being developed under the Recovery, Transformation and Resilience Plan”.
Regarding the results of the barometer, the Minister highlighted that “73% of the companies plan to increase or maintain their investments in Spain and 83% plan to increase or maintain their workforce”. These data, “aligned with the winter forecasts of the European Commission, which indicate that Spain will be the country of the European Union that will grow the most in 2021,” she said.
The publication was presented on Thursday at a conference attended by the Secretary of State for Trade, Xiana Méndez; the executive director of ICEX-Invest in Spain at ICEX, Elisa García Grande; the president of Multinationals for Brand Spain, Beatriz Blasco; the associate director of the Madrid Campus, IESE Business School, María Coello de Portugal, and the associate researcher at the International Center for Competitiveness- IESE Business School, María Luisa Blázquez.
During the presentation, Xiana Méndez emphasized the important role of this barometer from the perspective of foreign investors, especially in the current global environment. “Asking economic agents, knowing their opinions and their perception of our business climate, allows us to have a source of information with which to make the right decisions and adopt appropriate measures that favor the development of new investments.”
The responses from the more than 830 participating companies were collected during the months of October and November 2020, and therefore reflect the impact that the COVID-19 pandemic has had on the business climate and on the results and prospects of the companies. For this reason, a specific chapter on the impact of the health crisis has been included in this edition to try to assess and narrow down this circumstance.
In general terms, the assessment of the business climate in Spain is down on the previous year, with an average score of 2.8 out of 5, which is two tenths of a point less than in the previous edition.
The areas that received the highest scores from investors were those related to infrastructure, followed by human capital and quality of life. It is positive that, once again this year, these are for the most part the most important areas for investors.
The COVID-19 pandemic and the subsequent economic crisis have clearly affected the outlook for foreign investors in Spain for 2020, although companies foresee a clear improvement in 2021, which, however, will not yet reach pre-pandemic results.
Investment prospects for 2020 by foreign companies in Spain were not positive, with only 60% of companies in favor of increasing or maintaining their investments in Spain in 2020, compared to 91% the previous year. By 2021, the percentage of companies planning to increase or maintain their investments in Spain rose again, to 73%.
On the labor front, the outlook has been less negative – possibly due to the role of Temporary Layoff Plans (ERTE) – and the percentage of companies planning to increase or maintain their workforce in Spain has risen to 70% in 2020, from 87% who claimed to have done so in 2019.
The turnover outlook in our country for 2020 is the one that was most affected by the special circumstances of the past year. Thus, only 36% of companies planned to increase or maintain turnover in 2020, although this percentage rises to 69% in 2021.
Finally, with regard to export volume, 75% of the foreign companies surveyed export to third markets from Spain. In 2020, 29% of all the companies surveyed planned to decrease their exports, although by 2021 the percentage drops to 15%.
In Spain there has also been a fall in foreign direct investment flows received, although not as intense as has been seen in other countries. According to the Foreign Investment Register of the Ministry of Industry, Trade and Tourism, foreign investment in Spain (not ETVE) in the period January-September 2020, has fallen by 11% compared to the same period in 2019.
This drop is mainly due to the reduced volume of FDI registered in the first quarter of the year, in which much of the impact of the pandemic and mobility restrictions was concentrated. In contrast, productive FDI received by Spain in the second and third quarters of 2020, not only substantially improved the record of the first quarter of the year, but also improved that recorded in the second and third quarters of 2019. Thus the FDI received in the second quarter of 2020 has been 17% higher than that received in the same period of 2019, while that recorded in the third quarter of 2020 has improved by 30% the record of the third quarter of 2019.
These figures seem to indicate that, after the first negative impact of the COVID-19 pandemic and coinciding with the progressive de-escalation from June onwards, investors have resumed their operations in Spain.
