Country Insight Report
Spain
October 2022

Written 30 September 2022

Country Insight Report: Spain
September 2022

Table of Contents
HIGH-LEVEL SUMMARY

Overall Country/Region Risk Indicator

3

Global Insight4

Regional Insight

5

Country Insight Headlines

6

Credit Environment
Supply Environment
Market Environment
Political Environment

6
7
8
9

DETAILED ANALYSIS

Short-Term Economic Outlook

11Long-Term Economic Potential

12Market Potential

13

FX Risk

14

Transfer Risk

15

Business Regulatory Environment

16

Business Continuity

17

Political/Insecurity Risk

18

Expropriation/Nationalisation Risk

19

Statistical Reference20

Key Indicators and Forecasts
User Guide© Dun & Bradstreet

20
21

2

Country Insight Report: Spain
September 2022

OVERALL COUNTRY/REGION RISK INDICATOR
Current Risk Indicator:

Last change: March 2022 (DB3c ➔ DB3d)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively
manage their risk exposures.
DB3d
SLIGHT RISKWorldWatch Headline
Spain to continue taxing HNIs and excess profits of banks and energy companies; though it is trying to encourage reduced
household energy consumption and provide VAT concessions on gas usage.
Multi-Dimensional Analysis (MDA) Scores

Country/Region
MetricSpain

Germany

UK

FrancePortugal

Overall Country/Region Risk Indicator

DB3d

DB3a

DB3b

DB3c

DB4b

Short-Term Economic Outlook

DB5a

DB4d

DB4a

DB5c

DB5c

Long-Term Economic Potential

DB4a

DB4b

DB3d

DB3c

DB5a

Market Potential

DB3a

DB2c

DB2a

DB2c

DB3a

FX Risk

DB3c

DB3a

DB3c

DB3c

DB4a

Transfer Risk

DB2a

DB1d

DB1d

DB1d

DB1d

Business Regulatory Environment

DB3d

DB2a

DB2a

DB3a

DB3c

Business Continuity

DB4c

DB3c

DB3d

DB4d

DB4d

Political/Insecurity Risk

DB4a

DB2a

DB2b

DB3a

DB2a

Expropriation/Nationalisation Risk

DB3d

DB1c

DB2b

DB2b

Low Risk: DB1 - DB2

Moderate Risk: DB3 - DB4

DB3dHigh Risk: DB5 - DB7

Source: Dun & Bradstreet

Recent Changes
No respite for Spain's ultra-rich from under additional tax burden over 2023-24.
The VAT on natural gas will be reduced to 5% from 21% in October and last until the end of the year, to lower the heating
bill.
Hydropower generation has fallen 44%, leading to an increase in gas consumption for electricity generation.
Consumer price inflation stood at 10.5% y/y in August, with prices of food and drink rising 13.8%, the biggest increase since
the data series began in 1994.
Events to Watch
The shortage in hydropower is causing increased use of gas for power generation, keeping electricity prices high andexacerbating the tight supply situation.
Monitor developments in talks with Algeria as relations are increasingly getting strained; this is a threat to Spain's energy
security.
The euro risks lagging further behind the dollar and the pound as both the Federal Reserve (Fed) and Bank of England (BoE)
are further ahead in the rates normalisation curve than the ECB.
According to a private study, almost one third of the respondents are struggling with their finances and 60% of them believe
Spain is already in a recession.
Call to Action
Factor in elevated utility costs and high overall inflation into business plans.
Expect the euro to remain under pressure for the rest of this year.
Be wary of payment delays and default from Russian entities due to EU sanctions.
Look for opportunities in the EV sector, which is set to receive a boost under the Spanish Recovery and Resilience Plan.
© Dun & Bradstreet3

Country Insight Report: Spain
September 2022

GLOBAL INSIGHT
Current Trend Indicator:

Current Trend is DETERIORATING
Last Change: March 2022 (Stable ➔ Deteriorating)
DETERIORATINGDETERIORATINGSTABLE

IMPROVING

RAPIDLY

IMPROVING
RAPIDLY

Recent Developments
The US Fed delivered a third consecutive 75 bps rate hike as core inflation remains strong.
The Middle East's outlook moved to stable from deteriorating, to reflect healthier near-term economic prospects and anelevated geopolitical profile of several countries in the region.
Risk to economic growth has increased across Europe, exerting additional pressure on the Euro, and prompting monetaryand fiscal policy actions (e.g., the UK).
Ukraine’s counteroffensive has invoked a strong rhetoric from the Russian President, elevating risks of further escalation.
Exports in APAC began waning; also, leading indicators suggest China's economy may see a better H2 vs. H1 2022, but overall
growth prospects remain weak.
Global Growth Forecast8)%( htworg PDG laeR

6
4
2
0
-2
-4

2020

2021

World

North America

2022

2023
Asia Pacific

2024

2025

2026

Eastern Europe & Central Asia

Source: Haver Analytics/Dun & Bradstreet

Risks and Opportunities
Domestic political risks remain elevated globally; upcoming presidential elections in Brazil and Italy, and the US midterms
remain key events to watch.
Aggressive US Fed tightening exerts downward pressure on the currencies of developing economies.
Due to the rising cost of debt, highly-leveraged households and debt-laden sovereigns and corporates may create pockets of
distress, especially in emerging markets.
China's reopening from lockdowns can support manufacturing, but higher Covid case numbers remain a risk to supply chain
normalisation.
The fragility of the EU's energy security has been exposed by the Ukraine war; this may test the EU's cohesion as Russia uses
its leverage by reducing/stopping gas supplies.
Call to Action
Focus on volumes, not revenues, as price rises could obfuscate underlying business strength.
Expect further monetary tightening in the US as inflation remains the Fed's top priority.
Establish alerts for negative changes in customers’ and suppliers’ viability.
Review payment terms and ensure timely collections to minimise credit risks.
Conduct end-to-end supply chain reviews; European businesses should specifically work to secure energy supplies before
winter.

© Dun & Bradstreet

4

Country Insight Report: Spain
September 2022

REGIONAL INSIGHT
Current Trend Indicator:

Current Trend is DETERIORATING RAPIDLY
Last Change: March 2022 (Deteriorating ➔ Deteriorating
Rapidly)
DETERIORATING
RAPIDLY

DETERIORATINGSTABLE

IMPROVING

IMPROVING
RAPIDLY

Recent Developments
While governments across Europe seek to provide fiscal support against squeezing incomes, recession fears intensify.
In September, rampant inflation (9.7 y/y in the three months to August) has led the ECB to increase interest rates by a record
margin (0.75bps), to 1.25%.
Across the channel, the Bank of England maintains a hawkish posture, increasing rates by 0.5bps in September, to 2.25%
Despite this, both the GBP and the Euro remain under pressure relative to the USD, suggesting that the macroeconomic
outlook in Europe is likely to deteriorate further.
In several Eastern European economies, double-digit harmonised CPI inflation continues to increase or to remain elevated: inAugust, prices grew by 18.6% (14.6% in July) in Hungary, 14.8% (14.2%) in Poland and 17.2% (17.1%) in the Czech Republic.
REGIONAL OUTLOOKRegional Growth Forecast6)%( htworg PDG laeR

4
2
0
-2
-4
-6
-8

2020

2021

Western & Central Europe

2022

2023

2024

2025

2026

World

Source: Haver Analytics/Dun & Bradstreet

Risks and Opportunities
Both the euro and the GBP have depreciated against the USD, increasing FX risk.
Pressure on prices has reached new heights, pushing costs up for businesses while reducing demand.
We foresee higher bankruptcies, possible increases in payment delays and possibly a recession in key European economies,
including Germany and the UK.
Call to Action
Exchange-rate volatility increases risks for businesses that trade internationally.
When possible, businesses should use multiple currencies, and assess FX risk, as well as supply-chain risk both upstream (vssellers) and downstream (vs buyers).
To spot cash flow problems and stress test the vulnerability of their business to policy changes or to the re-orientation of
supply chains towards alternative energy exporters, businesses need to have a holistic view of the risks along their supply
chain.
As the number of business failures is likely to rise, monitor counterparty risk closely in order to reduce the risk of non- andlate payments.

© Dun & Bradstreet

5

Country Insight Report: Spain
September 2022

COUNTRY INSIGHT HEADLINES
CREDIT ENVIRONMENT
Current Risk Indicator:
Last change: March 2022 (DB3b ➔ DB3d)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively
manage their risk exposures.
DB3d
SLIGHT RISK

Risks and Opportunities
The drought has caused a decline in hydroelectricity power generation, which accounts for about 16% of Spain's generating
capacity.
Consumer price inflation stood at 10.5% y/y in August, with prices of food and beverages rising 13.8% - the biggest increasesince the data series began in 1994.
According to a private study, almost one third of the respondents are struggling with their finances, and 60% of them believe
Spain is already in a recession.
Spain gained European Commission (EC) approval for a second instalment worth EUR12bn of pandemic recovery funding,with approved funds at 45% of the total funds allocated.
The euro sank to parity with the dollar in July, and we expect the euro to remain under pressure for the rest of this year.
Trade Terms
Description

Terms

Minimum Terms

SD

Recommended Terms

SD

Usual Terms

90-120 days

Note: OA: Open Account; SD: Sight Draft (Documentary Collection); LC: Letter of Credit; CLC:Confirmed Letter of Credit; CiA: Cash in Advance. Source: Dun & Bradstreet

Export Credit CoverAgencyCover

Eksport Kredit Fonden (EKF)

Full cover available, conditions apply

US Eximbank

Full cover available

ECGD

Medium- or long- term cover only

Euler Hermes AG

Medium- or long- term cover available, limited short-term cover

Source: Export Credit Agencies

Call to Action
Factor in elevated utility costs and high overall inflation into business plans.
Note that the strengthening of the dollar bodes well for exporters and for the competitiveness of locally produced products,
but risks losing capital flows to the higher-yielding currency.
The euro risks lagging further behind the dollar and the pound as both the Fed and the BoE are further ahead in the rates
normalisation curve than the ECB.
Given the deterioration of payment performance during the pandemic, counterparty risk should be monitored closely.

© Dun & Bradstreet

6

Country Insight Report: Spain
September 2022

SUPPLY ENVIRONMENT
Current Risk Indicator:

Last change: September 2022 (DB4b ➔ DB4c)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses.
DB4c
SLIGHT RISK

Risks and Opportunities
The VAT on natural gas will be reduced to 5% from 21% in October and will last until the end of the year, to lower theheating bill.
Hydropower generation has fallen 44% in Spain over the past year, leading to increase in gas consumption for electricity
generation.
In addition to limit air-conditioning in public buildings and requiring establishments to switch off lights at 10 PM, thegovernment has issued further recommendations for households, like lowering the thermostat and not leaving applianceson standby.
The deterioration of democratic relations with Algeria, which is Spain's primary gas supplier, does not pose an immediate
threat but might be a long-term concern for energy security.
Spain has extended schemes such as EUR6bn in aid for companies and households and fuel discounts, and has extended VAT
reduction on energy costs until September.
Risk Index: Hazard & Exposure
3.0

xednI drazaH larutaN

2.5
2.0
1.5
1.0
0.5
0.0

Spain

Germany

UK

FrancePortugal

Note: 0 = lowest risk, 10 = highest risk Source: Haver Analytics

Call to Action
Be wary of elevated utility costs in the short to medium term.
Monitor the solvency of businesses, especially small and medium-sized enterprises (SMEs), as government initiatives aregradually withdrawn and conditions for business continuity deteriorate.
Make use of our Procurement and Supplier Management service, which can uncover risks for suppliers in their procurement
process.

© Dun & Bradstreet

7

Country Insight Report: Spain
September 2022

MARKET ENVIRONMENT
Current Risk Indicator:

Last change: September 2022 (DB3d ➔ DB4a)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses.
DB4a
SLIGHT RISK

Risks and Opportunities
Spain seeks to set a 4.8% tax on Spanish banks on profits made from net interest and fees charged to clients, as well as a 1.2%
levy on the domestic sales of energy firms.
Residents whose wealth exceeds EUR3 million will be subject to a new asset tax in 2023 and 2024.
A new tax on air conditioners, freezers and refrigeration, which came into effect in September, will see equipment prices go
up by up to 10% as part of a law approved in July.
France is looking to revive a gas pipeline project linking Spain and Germany, which was shut down in 2019, having been
deemed unprofitable.
The EC approved Spain's plan to lower the prices of natural gas used by power utilities, bringing down wholesale electricity
prices on the Iberian electricity market.

)DSU( PDG lanimoN

1.8tn

35k

1.44tn28k

1.08tn

21k

720bn

14k

360bn

7k

0

2020

2021

Nominal GDP (USD)

2022

2023

2024

2025

2026

)DSU( atipac rep PDG

Nominal GDP and GDP per capita - Spain

0

GDP Per Capita (USD)

Source: Haver Analytics/Dun & Bradstreet

Call to Action
Note that the tax on interest and fees income will negatively impact banks' profitability.
Be aware that the Russia-Ukraine conflict might lead to a restructuring of the energy supply chain, which will keep supply
tight in the short to medium term.
Make use of analytical tools to identify potential customers and market opportunities.
Customs agencies should take steps to improve connectivity with other agencies and trading partners.

© Dun & Bradstreet

8

Country Insight Report: Spain
September 2022

POLITICAL ENVIRONMENT
Current Risk Indicator:

Last change: August 2022 (DB3d ➔ DB4a)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses.
DB4a
SLIGHT RISK

Risks and Opportunities
Algeria has suspended a two-decade-old friendship treaty with Spain after the latter reversed its neutral position on theWestern Sahara dispute between Algeria and Morocco.
Morocco and Spain have agreed to reopen their economic borders at Ceuta and Melilla by January 2023 to guarantee thebeginning of a smooth and progressive transit of goods through land customs posts.
There have been sporadic protests across the country over a number of issues, ranging from protests against NATO toproposed changes to the country's abortion law.
Russia being a smaller trading partner than other EU members implies relative insulation for Spain from the geopoliticaltensions arising from the Russia-Ukraine conflict.
Prime Minister Sanchez is expected to hold back from calling a general election until December 2023, as late as possible, inthe hope of an economic upturn.
The risk of forcible expropriation has risen, as the government has imposed a rent cap on housing and a surcharge on thelocal property tax.
Political Freedom
Location

Electoral Process

Pluralism &Participation

Functioning ofGovernment

Freedom ofExpression &Belief

Association &Organization
RightsRule of Law

Personal
Autonomy &Individual Rights

Spain

12

16

9

14

11

13

15

Western & Central
Europe

11

15

10

14

11

13

14

OECD Average

11

15

10

14

11

13

14

Note: Higher score = greater degree of freedom Source: Freedom House

Call to Action
Monitor developments in talks with Algeria, as relations are increasingly strained; this is a threat to Spain's energy security.
Note that investors in strategic sectors and from countries without bilateral investment treaties may wish to take out
guarantees against expropriation.
Keep up-to-date with information on entities and individuals that threaten national security or bypass lawful trade andcommerce.

© Dun & Bradstreet

9Country Insight Report: Spain
September 2022

DETAILED ANALYSISThe following sections analyse in more detail the nine core elements that influence the risks and opportunities involved when
doing business in/with a given country.
The core categories that we analyse as part of our broader risks and opportunities model are as follows:
Short-Term Economic Outlook
Long-Term Economic Potential
Market Potential
FX Risk
Transfer Risk
Business Regulatory Environment
Business Continuity
Political/Insecurity Risk
Expropriation/Nationalisation Risk
Descriptions for each of these categories can be found in the User Guide.

© Dun & Bradstreet

10Country Insight Report: Spain
September 2022

SHORT-TERM ECONOMIC OUTLOOKCurrent Risk Indicator:

Last change: September 2022 (DB4d ➔ DB5a)
Red indicates that Negative factors/influences dominate
High Risk (DB7)
Low Risk (DB1)
Rating outlook is DETERIORATINGHIGH RISK Considerable uncertainty associated with expected returns. Businesses are advised to limit their exposure and/or
select high-return transactions only.
DB5a
HIGH RISK

Short-Term Economic Outlook Overview
We have maintained the outlook at 'deteriorating' as Spain grapples with drought, which is disrupting hydropower generationand leading to increasing gas usage. This accentuates the existing problems of persistently high inflation, especially for food andfuel, which is pushing the cost of living higher. Prices of agricultural products have also seen a sharp spike, given that Russia andUkraine are major exporters of wheat and maize. We are also wary of further downside risks due to the tightening of monetary
policy conditions globally. Russia is a moderately important source of petroleum for Spain, though supply is highly diversified.
The EU has expressed intentions to reduce gas imports by two-thirds and ban oil imports from Russia by the end of 2022; as aresult, supply is running low, with Spain facing higher prices as a consequence.
Recent Developments
The drought has caused a decline in hydroelectricity power generation, which accounts for about 16% of Spain's generating
capacity.
According to a private study, almost one third of the respondents are struggling with their finances, and 60% of them believe
Spain is already in a recession.
Consumer price inflation stood at 10.5% y/y in August, with prices of food and drink rising 13.8% - the biggest increase since
the data series began in 1994.
Spain has launched a scheme allowing free travel on suburban and middle-distance trains to address increasing fuel costs,
which is likely to benefit residents as well as tourists.
The number of people registering as jobless rose slightly in August from a month earlier but remained at a 14-year low.
Spain has passed two economic packages worth around €25 billion combined since June.

)%( htworg PDG laeR

6

9

1.2

6.8

-3.6

4.6

-8.4

2.4

-13.2

0.2

-18

2020

2021

Real GDP Growth (%)

2022

2023

2024

2025

2026

)%( noitaflnI

Real GDP Growth and Inflation - Spain-2

Inflation (%)

Source: Haver Analytics/Dun & Bradstreet

Risks and Opportunities
The shortage in hydropower is causing an increased use of gas for power generation, keeping electricity prices high andexacerbating the tight supply situation.
The uncertainty regarding energy prices and plans to curb Russian energy imports will continue to keep electricity prices
elevated in the short to medium term.
Subsidies on transport expenditure and an 80% reduction in energy bill taxes will provide some relief to consumers.
Call to Action
Factor elevated utility costs and high overall inflation into business plans.
Prepare for a further tightening of monetary conditions.
Note that the Russia-Ukraine conflict has the potential to create some debilitating disruption across industries, from energy
to agriculture.
© Dun & Bradstreet

11

Country Insight Report: Spain
September 2022

LONG-TERM ECONOMIC POTENTIAL
Current Risk Indicator:

Last change: November 2021 (DB4b ➔ DB4a)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses.
DB4a
SLIGHT RISK

Long-Term Economic Potential Overview
Spain has the potential for modest growth over the next decade - 0.5% a year in an an adverse scenario and 3.0% in a favourable
scenario. The economy is efficient, ranked 23rd in the world in the World Economic Forum's latest Global Competitiveness
Report, and Spain has good access to the European, North African and Latin American markets. The country has successfully
implemented key reforms conditional to receiving funds under the National Recovery Plan, including labour market reforms andthe sustainability of public finances. However, growth is at risk from high levels of debt, political divisions and recessionary fears
in the euro zone.
Recent Developments
Spain got EC approval for a second instalment worth EUR12bn of pandemic recovery funding, with approved funds at 45%
of total funds allocated.
Spain plans to relax work permit rules for foreigners to address labour shortages in industries such as tourism andconstruction.
The Russia-Ukraine conflict might lead to a restructuring of the energy supply chain, which will keep supply tight in the short
to medium term.
The energy crisis has accelerated the installations of solar panels by residential communities in Spain with the goal of
becoming self-sufficient and reducing gas consumption.
Exports and Imports
100
80

PDG fo %

60
40
20
0

2008

2009

Spain

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Western & Central Europe

Source: International Monetary Fund Direction of Trade Statistics/Haver Analytics

Risks and Opportunities
The EU Recovery Fund is expected to lift Spain's GDP by 1.8%, to 2.5%, by 2024 and create 250,000 additional jobs.
Additional pension funding to be assessed at the end of 2022 will lead to an increase in public spending, already one of thehighest in the EU as a percentage of GDP.
Labour market policies will need to be more proactive in reskilling and enhancing the employability of displaced workers.
The adoption rate of digital technologies by Spanish firms is close to the OECD average, but below that of the bestperforming countries.
Call to Action
Expect stronger focus on green energy, especially wind and solar.
Expect services such as IT, tourism and light manufacturing to provide the best long-term commercial opportunities.
Monitor the rollout of 5G, initially in the major cities.

© Dun & Bradstreet

12Country Insight Report: Spain
September 2022

MARKET POTENTIAL
Current Risk Indicator:

Last change: September 2022 (DB2d ➔ DB3a)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively
manage their risk exposures.
DB3a
SLIGHT RISK

Market Potential Overview
As the 13th largest economy in the world and the fourth-largest economy in the EU, with a wealthy and growing population,
Spain offers good opportunities for exporters. At 1.0%, the country's trade-weighted average tariff rate is low by international
standards. More than half of products from non-EU countries enter the EU tariff-free and no tariffs apply to goods imported
from elsewhere in the 27-member bloc. There are downsides though, stemming from the Russia-Ukraine crisis and its fallout on
businesses.
Recent Developments
Olive oil production might be down by more than 30% by November due to drought and high temperatures in Spain, which
accounts for two-fifths of the world's production.
9 million tourists visited Spain in July, about 800,000 fewer than those in the same month of 2019.
Spain’s large automobile sector is struggling, owing to a global shortage of microchips and semiconductors, and high input
costs; a full recovery may take until 2023.
Ford Motors has chosen a Valencia-based plant to build its next generation of EVs; Spain aims to be a leader in EVs in
Europe's competitive automotive market.
France is looking to revive a gas pipeline project linking Spain and Germany, which was shut down in 2019 having been
deemed unprofitable.
Main Restrictions on Imports
Tariff Barriers

Spain

Germany

UK

FrancePortugal

Overall Weighted Mean Tariff

1.5

1.5

1.3

1.5

1.5

Manufactures Weighted Mean Tariff

1.8

1.8

2.1

1.8

1.8

Primary Products Weighted Mean Tariffs

0.8

0.8

0.8

0.8

0.8

Overall MFN Tariff

1.8

1.8

1.8

1.8

1.8

Manufactures MFN Tariff

0.2

0.2

0.2

0.2

0.2

Primary Products MFN Tariff

5.6

5.6

6

5.6

5.6

Services Restrictiveness Index

16.1

17.5

14.3

26.4

21.8

Note: Tariff data displayed as %. For SRI data, 0 = completely open, 100 = completely closed Source: Haver Analytics/World Bank

Risks and Opportunities
The Spanish government has approved a plan to spend EUR12.25bn on the semiconductor and microchip industry by 2027,
including EUR9.3bn to fund the building of plants.
The Bank of Spain anticipates that the deterioration in Russia-EU trade relations will negatively impact sectors such astransport, metal and chemical.
A consortium led by Volkswagen Group and SEAT S.A. is looking to turn Spain into a hub for EV manufacturing in Europe.
Call to Action
Consider investing in one of Spain’s free-trade zones, where commercial operations may be conducted without incurring tax
or levies.
Look for opportunities in the EV sector.
Monitor free-trade talks between the EU and Mercosur.
Use analytical tools to identify potential new customers and market opportunities.

© Dun & Bradstreet

13

Country Insight Report: Spain
September 2022

FX RISK
Current Risk Indicator:

Last change: April 2022 (DB3b ➔ DB3c)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATING RAPIDLYSLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively
manage their risk exposures.
DB3c
SLIGHT RISKFX Risk Overview
The outlook for FX risk has been downgraded to 'deteriorating rapidly'. The EUR:USD exchange rate reached parity about amonth ago for the first time since 2002. The fact that the rate remains stuck at 1 despite the ECB hiking the repo rate by 50bp
signals that an increase in risk is warranted. Growth potential for the euro area is weak, with an increasing likelihood ofrecession, as suggested by several lead indicators, especially in Germany, where orders, inventories and confidence all point in
the same direction. FX risks also remain elevated as a result of the Russia-Ukraine crisis and its repercussions on euro-zone
economies, trade balances, the depreciation of the euro against other major currencies, the freeze on Russian assets, the highexposure of EU banks to Russia and the payment crisis resulting from the eviction of Russian banks from the SWIFT payment
system.
Recent Developments
The euro sank to parity with the dollar in July, and we expect the euro to remain under pressure for the rest of this year.
At its September meeting, the ECB increased interest rates by 75bps - the steepest hike since the central bank was
established.
Despite this, pressure on the currency is coming from different angles, including anaemic growth in major euro area
members like Germany and a massive deterioration of the euro zone trade balance.
With major central banks being much more hawkish than the ECB, the euro could depreciate further.
The EC has warned that Spain's vulnerabilities relate to high external debt, public and private, in a context of highunemployment and have cross-border relevance.
Import Cover (Months)

1.4

1.3

1.4

1.6

2

2.2

2.3

2.4

2.5

2.6

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Source: Haver Analytics/Dun & Bradstreet

Risks and Opportunities
The strengthening of the dollar in response to tightening monetary policy in the US bodes well for exporters and for thecompetitiveness of locally produced products.
However, it also risks losing capital flows to the higher-yielding currency.
The euro risks lagging further behind the dollar and the pound as both the Fed and the BoE are further ahead in the rates
normalisation curve than the ECB.
Loss of tourism revenue due to a decline in tourists from Russia might impact FX earnings.
Call to Action
Watch the ECB's policy: an anti-fragmentation tool aimed at avoiding a sovereign spread crisis has been announced byPresident Lagarde and other council members.
Importers may wish to hedge against the risks of a weakening euro.
Investors should monitor wider developments in the eurozone, particularly the Mediterranean, which is at risk of financial
stress.

© Dun & Bradstreet

14

Country Insight Report: Spain
September 2022

TRANSFER RISKCurrent Risk Indicator:

Last change: March 2022 (DB1d ➔ DB2a)
Green indicates that Positive factors/influences dominate
High Risk (DB7)
Low Risk (DB1)
Rating outlook is STABLELOW RISK Low degree of uncertainty associated with expected returns. However, country-wide factors may result in higher
volatility of returns at a future date.
DB2a
LOW RISKTransfer Risk Overview
There is no imminent risk of the government imposing exchange or capital controls that might prevent non-Russian entities
converting local currency into foreign currency and transferring it out of the country. The government is bound by national law
and various international treaties to ensure free and unrestricted repatriation of profits in foreign currency and is under noimmediate pressure to resile from these commitments. The few controls on capital transactions result from Spain's adoption of
EU banking and anti-money-laundering laws.
Recent Developments
Europe, including Spain, has moved to block access to the SWIFT international banking payment system for certain Russian
financial institutions.
Russian individuals and business owners in Spain, especially in the Costa del Sol, are struggling to transfer funds to and fromaccounts registered in Russia.
Spain will look to impose a levy on companies deemed to have profited from high gas prices.
Transfer Situation
Type

Delay

FX/Bank Delays

No delays reported

Local Delays

0-2 months

Note: Length of delay for completion of local and foreign transfers Source: Dun & Bradstreet

Trade Payment Restrictions
Trade Payment Restriction

Spain Western & Central Europe

OECD Average

Restrictions on non-Residents' Accounts

0

0

0.06

Restrictions on Payments for Imports

0

0.12

0.06

Restrictions on Payments for Invisible and other Current Transfers

0

0.36

0.35

Note: for a definition of the Trade Payment Restrictions please see the online user guide Source: International Monetary Fund

Risks and Opportunities
Data from our Worldwide Network partner Informa shows that between January and October 2021 business liquidations in
Spain increased 40% against that period in 2020.
The sharp rise in bankruptcies is a cause for concern.
Once fiscal support is removed and the moratorium on bankruptcy lifted, there is heightened risk of payment delays andinsolvencies in H2 2022.
The government can block remittances if firms fail to provide proof of having paid all tax or notarised evidence ofdistributed profits to shareholders.
Call to Action
Be prepared for additional payment difficulties, particularly from firms exposed to Russian or Belarusian entities.
Comply with EU banking and anti-money-laundering regulations in order to avoid delays to the remittance of funds.
Take advantage of Spain’s membership of the eurozone, which makes for easy transfer to other parts of the currency union.

© Dun & Bradstreet

15

Country Insight Report: Spain
September 2022

BUSINESS REGULATORY ENVIRONMENT
Current Risk Indicator:

Last change: August 2022 (DB3c ➔ DB3d)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively
manage their risk exposures.
DB3d
SLIGHT RISKBusiness Regulatory Environment Overview
We have maintained the outlook for business regulatory environment score at 'deteriorating', after the government tabled a
proposal to impose additional taxes on financial institutions and energy companies. In Spain, the general corporate tax rate is25%, with tax incentives for investing, particularly in R&D and technological innovation. Trading across borders is easy, the stateadministration is efficient and the enforcement of contracts is relatively quick and easy. However, problems remain aroundstarting a business, getting credit and dealing with construction permits.
Recent Developments
Spain seeks to set a 4.8% tax on Spanish banks on profits made from net interest and fees charged to clients, as well as a 1.2%
levy on the domestic sales of energy firms.
Residents whose wealth exceeds EUR3 million will be subject to a new asset tax in 2023 and 2024.
A new tax on air conditioners, freezers and refrigeration equipment has come into effect since September, which will see
their prices go up by up to 10% as part of a law approved in July.
The EC approved Spain's plan to lower the prices of natural gas used by power utilities, bringing down wholesale electricity
prices on the Iberian electricity market.
Ease of Paying Taxes, 2019
80
60

knaR

40
20
0

Spain

Germany

UK

FrancePortugal

Note: Low score = best, High score = worst Source: World Bank, 'Doing Business Report'

Risks and Opportunities
The proposed tax on banks will lead to an additional tax burden of EUR3bn over the next two years and has been criticisedas threatening to the financial system and as being in violation of EU guidelines.
The 2021-25 SME digitalisation plan aims to establish programmes to promote entrepreneurial and management training indigital processes.
The government is proposing to charge fees on all of Spain’s highways from 2022, although its annual budget lacks details on
how much this drive will cost.
Remote tech workers can use a non-resident tax status with lower rates for five years, forming part of a wider legislation to
help start ups, including investors' fiscal incentives.
Call to Action
Monitor tax law changes closely to enhance effective tax cost management, as tax rules remain in flux; consult a tax specialist
on any tax-related issues.
Be alert to the risk of high-level corruption, especially when bidding for public tenders, where firms with connections or awillingness to pay bribes have an advantage.
Take steps to minimise exposure to financial, legal and reputational risk.
© Dun & Bradstreet

16

Country Insight Report: Spain
September 2022

BUSINESS CONTINUITY
Current Risk Indicator:

Last change: September 2022 (DB4b ➔ DB4c)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses.
DB4c
SLIGHT RISKBusiness Continuity Overview
The business continuity has been downgraded to DB4c as a prolonged drought and heat waves are impacting Spain's energy
supply dynamics. The highly uncertain energy outlook is keeping utility costs elevated in the short run, which, combined with
supply-chain bottlenecks, will hamper the ability of manufacturers to increase production. Global commodity markets surged tomulti-year highs after traders backed away from Russia, disrupting supply of everything from wheat to natural gas. Shortfall of
supply in aluminium from Russia and neon from Ukraine will be detrimental for the already struggling automobile
manufacturers.
Recent Developments
The VAT on natural gas will be reduced to 5% from 21% in October and last until the end of the year, to lower the heating
bill.
Flights were cancelled across Spain's Canary Islands as storm Hermine moved in from over the Atlantic, bringing heavy rainsto the popular holiday destination.
In addition to limit air-conditioning in public buildings and requiring establishments to switch off lights at 10 PM, thegovernment has issued further recommendations for households, like lowering the thermostat and not leaving applianceson standby.
Hydropower generation has fallen 44% in Spain, leading to an increase in gas consumption for electricity generation.
Transmission system operator, Enagas, will sell extra slots for tankers to unload at terminals for converting liquefied naturalgas (LNG) to gas to address supply concerns.
Logistics Performance Index, 2018
5

xednI ecnamrofreP scitsigoL

4
3
2
1
0

Spain

Germany

UK

FrancePortugal

Note: 1 = worst performance, 5 = best performance Source: World Bank/Haver Analytics

Risks and Opportunities
August was the most expensive month for electricity on record, with the average price climbing to EUR308/MWh on thewholesale market.
High temperatures are making it difficult to adhere to air conditioning restrictions.
Conditions for automobile manufacturers will come under major strain due to diversion of supply routes and escalating
costs of raw materials.
Call to Action
Be wary of elevated utility costs in the short to medium term.
Monitor the solvency of businesses, especially for small and medium-sized enterprises (SMEs); the coronavirus continues toaffect business continuity.
Firms should continually monitor supplier risk.
© Dun & Bradstreet

17

Country Insight Report: Spain
September 2022

POLITICAL/INSECURITY RISKCurrent Risk Indicator:

Last change: August 2022 (DB3d ➔ DB4a)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is DETERIORATINGSLIGHT RISK Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses.
DB4a
SLIGHT RISKPolitical/Insecurity Risk Overview
We have maintained the political risk score at DB4a, with a 'deteriorating' outlook, following the deterioration in diplomatic
relations with Algeria, a primary supplier of natural gas to Spain. Spain has also experienced civil unrest as a consequence of therise in inflation that is eroding standards of living. Different groups have expressed dissent following high fuel prices andrestrictions related to the coronavirus. There is a risk of escalation ahead of the general election in 2023 if the surges in
production costs and the costs of living cause sustained hardship.
Recent Developments
Algeria has suspended a friendship treaty with Spain after Spain reversed its neutral position on the Western Sahara dispute
between Algeria and Morocco.
Morocco and Spain have agreed to reopen their economic borders at Ceuta and Melilla by January 2023 to guarantee thebeginning of a smooth and progressive transit of goods through land customs posts.
The prime minister’s popularity has been damaged by the rising cost of living, with the conservative People’s Party
overtaking his Socialists in national polls and winning a decisive victory in a regional election in Andalucía two months ago.
Spain is increasingly concerned that its gas supply could be affected after Rome’s move to secure large volumes of Algeriangas.
Level of National Grievance, 2022
5

ecnaveirG lanoitaN

4
3
2
1
0

Spain

Germany

UK

FrancePortugal

Note: 1.0 = lowest grievance, 10.0 = highest grievance Source: Fund for Peace, 'Fragile States Index'

Risks and Opportunities
Algeria is committed to honouring its gas supply contracts with Spain, but deteriorating diplomatic relations and increasing
interest from Italy might pose headwinds.
A hunger crisis worsened by Ukraine’s disrupted grain exports may trigger migration from the Sub-Saharan areas toautonomous African regions under Spanish governance.
Prime Minister Sanchez is expected to hold back from calling the general election until December 2023, as late as possible, inthe hope of an economic upturn.
Call to Action
Monitor developments in talks with Algeria, where relations are increasingly strained; this is a threat to Spain's energy
security.
Factor the consequences of terrorism into business plans, be it disruption to supply lines, higher insurance costs or direct
collateral damage.
Keep up-to-date with information on entities and individuals that threaten national security or bypass lawful trade andcommerce.
© Dun & Bradstreet

18

Country Insight Report: Spain
September 2022

EXPROPRIATION/NATIONALISATION RISKCurrent Risk Indicator:

Last change: December 2021 (DB3c ➔ DB3d)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively
manage their risk exposures.
DB3d
SLIGHT RISK

Expropriation/Nationalisation Risk Overview
The risk of forcible expropriation is low. In October, the government agreed to various reforms to Spain's housing laws,
including a rent cap on landlords with more than 10 properties and a new surcharge to the local property tax of up to 150%,
justified by the need to make rented property more accessible for young people. This follows the imposition of a price cap on
gas and electricity prices for consumers in September, to contain what the government has described as the 'extraordinary
profits' of energy companies. In response, energy companies accused the government of creating a climate of legal insecurity.
Recent Developments
The government’s housing bill contains plans to stop subsidised housing from being sold to its occupiers, as has happened in
the past.
The cap on gas prices imposed in September posed difficulties for energy companies, which were unable to pass on the risein cost of wholesale gas.
Spain has signed a new bilateral investment treaty with Columbia; the treaty provides explicit protections to Columbian
investors.

)DSU( IDF fo kcots llarevO

900bn

80bn

720bn

64bn

540bn

48bn

360bn

32bn

180bn

16bn

0

2007

2008

2009

2010

2011

Overall Stock Of FDI (USD)

2012

2013

2014

2015

2016

2017

2018

2019

2020

)DSU( woflni ten IDF

Foreign Direct Investment - Spain0

FDI Net Inflow (USD)

Source: United Nations Conference on Trade and Development

Risks and Opportunities
The end of the state of alarm ends the government’s previous right to requisition property and equipment without legal
process.
In case of a dispute, foreign companies may take their case to one of Spain’s three arbitration courts or pursue the caseinternationally.
The Multilateral Investment Guarantee Agency insures investments against political risk, and the Overseas Private Investment
Corporation offers guarantees for US firms.
Expropriations are generally carried out in a non-discriminatory manner, with reasonable compensation paid and inaccordance with due legal process.
Call to Action
Note that investors in strategic sectors and from countries without bilateral investment treaties may wish to take out
guarantees against expropriation.
Before buying land, investigate whether it might be subject to exemptions under Spain’s expropriation laws.

© Dun & Bradstreet

19Country Insight Report: Spain
September 2022

STATISTICAL REFERENCE
KEY INDICATORS AND FORECASTS
Key Indicators and Forecasts
Historical Data/Forecasts
Metric

2017

2018

2019

2020

2021

2022f

2023f

2024f

2025f

2026f

3

2.3

2

-11.3

5.5

3.8

2

3

2.3

2.1

Nominal GDP in USDbn

1,310

1,421

1,394

1,274

1,421

1,413

1,420

1,507

1,577

1,644

Nominal GDP in local currency

1.2tn

1.2tn

1.2tn

1.1tn

1.2tn

1.4tn

1.5tn

1.5tn

1.6tn

1.6tn

GDP per Capita in USD

28,12930,37429,584

26,90529,91429,71029,886

31,73533,26434,708Population (year-end, m)

46.6

46.8

47.1

47.4

47.5

47.6

47.5

47.5

47.4

47.4

Exchange rate (yr avge, USDLCU)

0.9

0.8

0.9

0.9

0.8

1

1

1

1

1

Current Account in USDbn

36.3

27.6

29.7

10.5

13.1

10.8

-3.1

-13.2

-17.6

-21.3

Current Account (% of GDP)

2.8

1.9

2.1

0.8

0.9

0.8

-0.2

-0.9

-1.1

-1.3

FX reserves (year-end, USDbn)

353.2

378.4

386.6

422.9

568.7

591.8

622

673.2

743.1

836.4

Import Cover (months)

1.4

1.3

1.4

1.6

2

2.2

2.3

2.4

2.5

2.6

Inflation (annual avge, %)

2

1.7

0.8

-0.3

3

8.7

4.8

1.2

1.1

0.9

Govt Balance (% GDP)

-3.1

-2.6

-3.1

-10.3

-6.9

-5.5

-4.3

-4.2

-3.7

-3.3

Real GDP growth (%)

Source: Haver Analytics/Dun & Bradstreet

Comparative Market Indicators
Indicator

Spain

Germany

UK

FrancePortugal

Income per Capita (USD)

29,71049,883

48,17843,52724,443

Country Population (m)

47.6

83.4

67.5

64.6

10.3

Internet users (% of population)

93.2

89.8

94.8

84.8

78.3

Source: Various sources/Dun & Bradstreet

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© Dun & Bradstreet

20

Country Insight Report: Spain
September 2022

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