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Exports fell by more than 25% in nine Spanish regions during the pandemic, while Extremadura increased its levels by 4.8%

Spanish exports of goods dropped on average 29.4% during the quarter of March to May 2020 in comparison with the same period in 2019, as the impact of the COVID-19 hit global supply chains. In comparison with the positive trend in foreign sales during the first two months of the year, all of the Spanish regions, except for Extremadura, recorded negative levels in the months that followed marked by confinement restrictions. The Canary Islands was the most affected region, with a decrease of 46%, followed by Galicia (-43.7%), the Basque Country (-37.1%), Aragón (-35.2%) and Navarra (-35%). On the other hand, despite the pandemic, Extremadura managed to increase its sales outside of Spain by 4.8%. In addition, the Balearic Islands with a decrease of 4.1% and Murcia with 16.1% were the other two regions in which the crisis least affected foreign trade.

However, the real role that exports of goods play in the regional economies during the COVID-19 crisis depends on the weight of exports on GDP. On average, exports in Spain represent 23% of production, while in Navarre they account for almost 50%, whereas in the Canary and Balearic Islands they barely reach 6% . The variance across regions in the weight of exports of goods on GDP is a result of their different productive fabrics. Navarre is the region with the highest percentage of industrial employment, around 26%, compared to the national average of 14%. On the other hand, the Balearic and Canary Islands have levels below 7% because the services sector has a greater weight which is above 80%. In these regions, exports have less influence on the regional economy as a whole, which has been more affected by the serious consequences of COVID-19 on tourism.

Beyond the weight on the economy, as we have seen, exports behaved differently in each of the regions, according to the new COVID-19:IvieExpress report developed by Francisco Alcalá and Juan Carlos Robledo. As stated by the authors, these differences can be explained by the productive specialization of each region. Those regions that specialize in sectors seriously affected by the pandemic such as, transport equipment, especially motor vehicles, have been most affected, namely, Castilla y León, Navarre and Aragón, with a fall in exports of 29.3% during the quarter from March to May 2020. A notable side effect of the pandemic has been the increase in demand for pharmaceutical and agricultural products, whose sales abroad increased by 14.8% and 8.7%, respectively. Andalusia, Murcia, Extremadura and the Valencian Community are the regions that specialize most in agricultural products, while Madrid and Catalonia in pharmaceutical products, and therefore, all of them have benefitted from their improved performance during the crisis.

In the report, Alcalá and Robledo also point to other factors beyond productive specialization that could explain the good or bad results in exports of the Spanish regions during the pandemic, in particular, aspects such as a more dynamic business initiative or a stronger positioning in the less affected destination markets.

Forecasts for 2020

According to the report, which bases its forecasts on data from the World Trade Organization (WTO), the level of exports at the end of 2020 will still be negative, with a fall in Spain of 12.9% in the most optimistic scenario and 31.9% in the worst case. According to these forecasts, the least affected regions will be Murcia, with a decrease in exports of 12%-28%; Extremadura, 12.3%-29.5%; and Andalusia, 12.6%-29.6%. In contrast, the most affected communities will be Galicia will a drop of 14.1%-36.2%, Navarra, 13.5%-34.9% and Aragón, 13.3%-34.5%.

However, the report points out that, although exports have been hit hard by the pandemic, the foreign market will once again be a key lever in overcoming the crisis, especially as Spain’s domestic market is expected to recover at a slower pace than that of its neighboring countries.

Therefore, the authors of the report emphasize that each region’s performance in exports during the COVID-19 crisis and throughout the stages that follow will not depend on past success but on the efforts put forth now and in the coming months. In conclusion, public-private cooperation, the efficient and intelligent use of European funds and the alignment with technology policies that prioritize digitalization and environmental sustainability will be key to overcoming the crisis by relying foreign trade.