Sectors of the future ( 373,59 KB )

 

Which sectors can drive business in a future cycle of growth?

  Construction played a key role in the last expansionary cycle of the Spanish economy. Its intense growth not only raised its share of GDP but, being an activity with a powerful knock-on effect, it also generated strong synergies of growth in other sectors of the economy. Once the recession hit, the tables turned and the sharp brake on property has affected the rest of its associated sectors. Moreover, the sovereign debt crisis means that the fiscal stimuli implemented to slow up the slump in demand will now have to be withdrawn sooner, damaging the perspectives for growth in domestic demand. However, the capacity of emerging countries to recover (China, Brazil, India, etc.), together with the United States exiting its recession, have meant that the foreign sector is one of the areas that is boosting demand in a large number of European countries.

  All these disturbances have been added to an economy that is in a complicated phase of the cycle, but it is estimated that the worst is now behind us. Within this state of affairs, one of the questions most often asked concerns the economy's capacity or potential for growth in the next expansionary phase. More specifically, which sectors will «drive» business, assuming that the role played by construction and the property market in the previous phase will not be repeated.

  Answering this question requires an analysis and prediction that is beyond the scope of this box. However, one way of providing an initial examination of growth potential at a sector and branch level of activity is by drawing up a taxonomy of these according to the destination of their sales. The criterion used to make this division is based on a future scenario in the medium term defined in accordance with the aforementioned parameters, i.e. construction and the property market will continue to be depressed, domestic demand will recover slowly and the greatest opportunities for growth will occur in export markets, preferably towards non-EU countries. We can therefore distinguish five groups of sector, using information available from the input-output tables for the Spanish economy produced by the National Institute of Statistics. This statistical instrument lists an economy's total supply of goods and services with their destination, distinguishing between production and imports and differentiating between intermediary consumption and end demand, in turn dividing the latter into its different components, i.e. end consumption, capital formation, exports, etc. This information helps relations between sectors to flourish and provides great insight into an economy's production and demand structure.

  In accordance with the criteria described, the first group is made up of those sectors most oriented towards exports and less dependent on construction activities, therefore the best positioned sectors, whose share of the total value added would be a little more than 17% (the data correspond to 2005, the last input-output table available). Here we find important sectors of the Spanish economy such as chemicals, agriculture and stockbreeding, car manufacture, machinery and mechanical equipment manufacture, textiles, clothing and footwear, electronic equipment, computing and office material.

  We can then define a second group made up of sectors that have little or no dependence on construction and are not very oriented towards exports, although a large number of these have the potential to increase their exports. These go to make up more than 27% of the total value added and, most importantly, they include the activities of the food, beverage and tobacco industries. Here we also find corporate services, wholesale trade and distribution of fuel, publishing and graphic arts, furniture, financial brokering and insurance, etc.

  The third group is made up of sectors that are highly dependent on construction but also oriented towards exports, a circumstance that should allow them to at least partially offset the adjustment taking place in the property market. These are metallurgy, machinery and electrical material, as well as ceramics and glass. This is the smallest of the groups, as it hardly achieves 2% of the value added.

  In fourth place would be those activities strongly linked, directly or indirectly, with construction and the property market and not very oriented towards exports, these being in the worst position. In addition to these two sectors, the group also includes the manufacture of metal products, cement, lime and plaster, wood and cork and recycling. These go to make up 25% of the value added for the year 2005, a year when these activities were on the rise, so that their relative weight will have fallen appreciably after the adjustment that has taken place to date.

  Lastly, we have also defined a group made up of services offered by the public authorities or non-exportable market services, such as domestic services and those related to people, with a share close to 30% of the total economy.

  This classification bears out the fact that the adjustment in the property market, whose effects in terms of growth are certainly relevant, is nonetheless limited in scope, since around three quarters of the economy has few direct or indirect links with construction. Moreover, the exporting core of the economy has an important weight that, although it won't make up for the decline in the property market, it will have the capacity to pull with it a large part of the rest of the sectors in the market, as well as possibly being reinforced by other activities whose export potential has not been fully exploited. It should be noted that, within this core, we find traditional industrial sectors that are not usually taken into account when debating the «sectors of the future» (motor vehicle industry, textiles, chemicals, food, etc.) but whose capacity to support growth and create jobs means they must be included in any development strategy. The key lies in those sectors with growth potential being within a suitable regulatory, financial and fiscal environment and in them being able to take on the tough international competition, orienting themselves towards those activities where they can maximise their profits and growth.

  This box was prepared by Joan Elias and Pere Miret

  European Unit, "la Caixa" Research Department

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