How does the situation and prospects of the Spanish economy impact companies?
What solution exists to alleviate the economic risks of the current energy crisis?
In this article we show, in addition to the projections of the Spanish economy made by the Bank of Spain and its consequences for the company, the benefits of adopting an internationalization strategy, in order to create a diversified market.
Prospects of the Spanish economy
in his last Spanish economy projections report (October 2022), the Bank of Spain is blunt: it cuts growth expectations for 2023 and increases the inflation rate.
Despite the fact that the banking authority foresees an increase in GDP of 1.4% for the following year, this data contrasts with that presented in its previous report (June 2022). Growth expectations in 2023 have been reduced by 50%.
Meanwhile, the Harmonized Index of Consumer Prices (HICP) stands at 5.61TP3Q, versus a 2.61TP3Q projected in June. Which supposes an increase in the inflationary rate of 3%.
Source: Macroeconomic Projections of the Spanish Economy (2022-2024)
According to the estimates of the Bank of Spain, the downward revision of the GDP is precisely due to the impact of the high inflation rates. In addition, supply distortions, the global slowdown in demand and tougher financial conditions lead to worsening short-term forecasts.
The evolution of the Spanish economy is marked, in addition to persistent inflation, by the reduction in confidence of agents and a high degree of uncertainty. These factors are linked to the consequences of the war in Ukraine and the energy crisis.
Thus, the evolution of productive activity, employment, prices, wages, domestic demand and access to credit are directly linked to highly unpredictable events. It is not surprising that the Bank of Spain has substantially modified the growth and inflation figures.
Consequences of the current situation of the Spanish economy
The Spanish industry is suffering the effects of inflation, also called “the hidden tax”. Few are the companies that manage to maintain their sales volume.
Declines in consumption, especially in non-essential goods and services, are taking a toll on corporate profits.
The problem is that the scenario in which the Spanish economy is immersed, which is beginning to be lasting and is beginning to test the resistance of the less capitalized companies.
On the other hand, the less ability to reinvest profitss in capital goods and infrastructure causes a decline in competitiveness.
European countries are trying to find solutions that will stop the energy crisis. But, given the projections of the Bank of Spain, the risk is still present.
Faced with this uncertainty, business managers are assessing expansion into the international market as a strategy that allows them to diversify demand.
Need to create a diversified market
Exportation becomes an increasingly necessary activity. It is not only about reducing the degree of dependence on the internal market: the key is to create a global diversified market.
The first and main benefit of business internationalization is the increase in business opportunities, which opens the door to increase sales volume and take advantage of economies of scale.
There are a total of 194 officially recognized markets. Each of them presents different characteristics and its own economic situation. In this way, the impact of a recession (or simply a slowdown in demand) on a particular economy can be cushioned.
In addition, diversifying in different international markets allows an improvement in the seasonality of sales, making it possible to maintain the production rate throughout the fiscal year.
In any case, starting business expansion plans to overcome the prospects of the Spanish economy can be complex. These types of initiatives require investment and it is necessary find financing solutions for companies flexible; adapted to each specific case.
Due to the continuous changes and transformations experienced by the financial market, companies must adapt to a new situation of increasingly restricted bank financing and that it demands high requirements according to the security and guarantee of credits, not to mention the high cost involved.
That is why at AlterFinance we have non-bank financing, which offers financing alternatives adaptable to the different needs that your company may have. Talk later? Ask us without obligation.