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Spain: Market Profile

Picture: Spain factsheet
Picture: Spain factsheet

1. Overview

Continuing fiscal consolidation, banking sector restructuring and structural reforms, particularly in the labour market, have been broadly positive for the Spanish economy. In addition, lower borrowing costs, declining unemployment and improving export prospects alongside a competitive euro have given consumers and businesses more confidence when making consumption and investment decisions. Nevertheless, base-broadening measures on corporate taxation, increases in excise duties on alcohol and tobacco and a wider base for social contributions may temper more expansionary fiscal policy orientation in the quarters ahead.

Source: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

October 2017
Madrid imposed direct rule in Catalonia after voters in a referendum backed separation from Spain.

June 2018
Prime Minister Mariano Rajoy lost a vote of confidence. Opposition leader Pedro Sanchez took over as premier.

Source: BBC country profile - Timeline, Fitch Solutions Political Risk Analysis

3. Major Economic Indicators

Graph: Spain real GDP and inflation
Graph: Spain real GDP and inflation
Graph: Spain GDP by sector (2017)
Graph: Spain GDP by sector (2017)
Graph: Spain unemployment rate
Graph: Spain unemployment rate
Graph: Spain current account balance
Graph: Spain current account balance

e = estimate, f = forecast
Source: International Monetary Fund

4. External Trade

4.1 Merchandise Trade

Graph: Spain merchandise trade
Graph: Spain merchandise trade

Source: WTO
Date last reviewed: August 21, 2018

Graph: Spain major export commodities (2017)
Graph: Spain major export commodities (2017)
Graph: Spain major export markets (2017)
Graph: Spain major export markets (2017)
Graph: Spain major import commodities (2017)
Graph: Spain major import commodities (2017)
Graph: Spain major import markets (2017)
Graph: Spain major import markets (2017)

Source: Trade Map, Fitch Solutions
Date last reviewed: August 29, 2018

4.2 Trade in Services

Graph: Spain trade in services
Graph: Spain trade in services

e = estimate
Source: WTO
Date last reviewed: August 21, 2018

5. Trade Policies

  • Spain is a member of the European Union (EU) which has a common set of tariffs and customs levied on various imports and exports. As such, the trade policy is largely identical to that of the wider regional bloc. The EU updated its trade policy (and, by extension, its import tariffs, customs, duties, and procedures) in 2017 and 2018.
  • The EU is party to some 50 FTAs and, consequently, access to other markets of the countries concerned is currently mediated through those agreements. The EU’s scheme on generalised system of preferences (GSP) entered into effect on January 1, 2014. Under the scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded USD4,000 for four years in a row. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since May 1, 1998.
  • A number of Chinese mainland-origin products are subject to EU’s anti-dumping (AD) duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass. As at end-December 2017, the EU did not apply any AD measures on imports originated from Hong Kong.
  • To combat the spread of the Asian long-horned beetle, in July 1999 the EU introduced emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3 mm across, or have been kiln-dried to below 20% moisture content.
  • For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. The EU also adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from January 16, 2007. In addition, the EU has adopted a Directive to prohibit the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
  • The EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On December 3, 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive. The recast RoHS Directive was published on July 1, 2011 and entered into force on January 2, 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. From July 22, 2019, the new Directive will widen the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
  • Another important law for foreign companies concerns the WEEE Directive. With the formal approval on June 7, 2012, the recast WEEE Directive entered into force on August 13, 2012. In brief, the recast WEEE Directive subjects Member States to higher collection/recycling targets (a 45% collection rate as of 2016 and 65% from 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs. On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
  • REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
  • Nine types of goods imported into the EU are subject to licensing. These goods are (broadly): textiles; various agricultural products; iron and steel products; ozone-depleting substances; rough diamonds; waste shipment; harvested timber; endangered species; and drug precursors. No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.
Source: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Multinational Trade Agreements

Active

  1. EU: Spain is a member of the EU that comprises 28 member states, and it follows EU's common external trade policy and measures. All EU member states adopt common external trade policy and measures. Meanwhile, 19 EU members, including Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, have adopted the euro as their legal tender.

  2. European Economic Area EU-European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland): While it enhances trade flows between these countries, only Switzerland is a fairly major trading partner. The European Economic Area (EEA) unites the EU Member States and the three EFTA States (Iceland, Liechtenstein, and Norway) into an Internal Market governed by the same basic rules. These rules aim to enable goods, services, capital, and persons to move freely about the EEA in an open and competitive environment, a concept referred to as the four freedoms.

  3. EU-Turkey - The customs union with the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers.

  4. The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada: CETA is expected to strengthen trade ties between the two regions, having come into effect in 2016. Some 98% of trade between Canada and the EU will be duty-free under CETA. The agreement is expected to boost trade between partners by more than 20%. The EU expects CETA to improve trade in goods and services between the two regions, while, at the same time, boosting FDI. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice-versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

Ratification Pending

  1. SADC-Economic Partnership Agreement (Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Angola, Comoros, Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Seychelles, Tanzania, Zambia and Zimbabwe) - An agreement between parties was reached in 2016 and is awaiting ratification, with 13 of the 35 needed states having ratified the agreement as of April 2018.

  2. Central America-EU Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize, and Dominican Republic) - An agreement between the parties was reached in 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of April 2018).

  3. EU-Japan Trade Agreement - In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the European Commission, the EU-Japan Economic Partnership Agreement (EPA) will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and is expected to come into force by the end of the current mandate of the European Commission in 2019. The total trade volume of goods and services between the EU and Japan is EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products and it seeks to open up services markets, in particular financial services, e-commerce, telecommunications and transport. As of August 2018, the agreement is awaiting ratification by the European Parliament and the Japanese Diet following which it could enter into force in 2019. At the same time, negotiations with Japan continue on investment protection standards and investment protection dispute resolution.

Under Negotiation

  1. EU-US (Trans-Atlantic Trade and Investment Partnership) - Expected to increase trade and services, but unlikely to pass under a Trump administration in the US.

  2. The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2017, while bilateral trade in services added an additional EUR27 billion. The negotiations aim at removing trade barriers, streamlining standards and putting European companies exporting to or doing business in Australia on an equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.
Source: WTO Regional Trade Agreements database, European Commission, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Spain FDI stock
Graph: Spain FDI stock
Graph: Spain FDI flow
Graph: Spain FDI flow

Source: UNCTAD
Date last reviewed: August 21, 2018

7.2 Foreign Direct Investment Policy

  1. Spain is an open economy and seeking to attract additional foreign investment, particularly to continue its recovery from the recent economic crisis. Spain’s excellent infrastructure, large domestic market, well-educated work force, and export possibilities have attracted foreign companies in large numbers over the past three decades. With the aim of promoting investment, employment, competitiveness and economic growth, the Spanish government and all other public authorities have been developing and consolidating an extensive and complete system of aid instruments and incentives especially targeted at boosting employment, regional investment and at research, development and technological innovation. To promote investment into the country’s key industries such as aerospace, automotive, biotechnology, pharmacy and life sciences, environment, ICT and chemicals, incentives including state incentives for training and employment and preferred financing from the Official Credit Institute (Instituto de Crédito Oficial or ICO) are widely available.

  2. Registration requirements are straightforward and apply to foreign and domestic investments equally. They aim to verify the purpose of the investment, and do not block any investment. On September 1, 2016 a new Resolution of the Directorate General for International Trade and Investments at the Ministry of Economy, Industry and Competitiveness came into force, under which new forms for declaration of foreign investments before the Investment Registry were established, when the person obliged to declare is the investor or company with foreign participation.

  3. Spanish law protects property rights and those of intellectual property. The government has amended the Intellectual Property Act, the Civil Procedure Law, and the Penal Code to strengthen online protection. Still, internet piracy has continued to increase over the past several years. The government has repeatedly commented that the government aims to make Spain increasingly attractive to foreign investors. Spain offers investment opportunities in sectors and activities with significant added value. There have not been any major changes in Spain’s regulations for investment and foreign exchange under the Popular Party (PP) administration, which took office in December 2016. Spanish law permits 100% foreign ownership in investments (limits apply regarding audio-visual broadcast licenses), and capital movements are completely liberalised.

  4. Spanish law has adapted its foreign investment rules to a system of general liberalisation, without distinguishing between EU residents and non-EU residents. Law 18/1992 of July 1, establishing rules on foreign investments in Spain, provides a specific regime for non EU persons investing in certain sectors: national defence-related activities, gambling, television, radio, and air transportation.

  5. For EU residents, the only sectors with a specific regime are the manufacture and trade of weapons or national defence-related activities. For non-EU companies, the Spanish government restricts individual ownership of audio-visual broadcasting licenses to 25%. Specifically, Spanish law permits non-EU companies to own a maximum of 25% of a company holding a digital terrestrial television broadcasting license; and for two or more non-EU companies to own a maximum of 50% in aggregate. In addition, under Spanish law a reciprocity principle applies (art. 25.4 General Audio-visual Law). The home country of the (non-EU) foreign company must have foreign ownership laws which permit a Spanish company to make the same transaction.

  6. Spain is a member of the Organization for Economic Co-operation and Development (OECD), the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD).

  7. When establishing a company in Spain, the basic requirements include incorporation before a Public Notary and filing with the companies register, known as the Mercantile Register (Registro Mercantil). The Central Mercantile Register is an official institution that provides access to companies’ information supplied by the Regional Mercantile Registers after January 1, 1990. Any national or foreign company can use it, but must be registered and pay taxes and fees..

  8. On August 1, 2014, the Spanish Council of Ministers approved three Tax Reform bills relating to Personal Income Tax, Corporate Income Tax, and Value Added Tax (VAT) that went into effect on January 1, 2015. Although the reforms generally reduced personal and corporate taxes in most categories, one of the new measures was an exit tax that applies to taxpayers that have had tax residency in Spain for at least ten of the last fifteen years and who own more than EUR4 million in relevant assets or more than 25% of a company worth over EUR1 million. Although the measure seeks to combat offshore tax evasion, the provision has caused concern among Spanish entrepreneurs and foreign investors who believe the reform will make it difficult for Spanish start-ups to relocate outside the EU, which can be essential for the growth of a new business.

  9. Spanish legislation has set up a series of safeguards to prevent the nationalisation or expropriation of foreign investment. Since the beginning of the economic crisis, Spain has altered its renewable energy policy six times, creating a high degree of regulatory uncertainty, and resulting in losses to some foreign companies’ earnings and investments. In December 2012, the government enacted a comprehensive energy sector reform plan in an effort to address a EUR30 billion energy tariff deficit caused by user rates that were insufficient to cover system costs

Sources: WTO - Trade Policy Review, the International Trade Administration (ITA)

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
The four main free zones are: Ceuta and Melilla free zone, Cadiz, Vigo and Canary Island free zones.Both the mainland and islands (and in most Spanish airports and seaports) have numerous free trade zones where manufacturing, processing, sorting, packaging, exhibiting, sampling and other commercial operations may be undertaken free of any Spanish duties or taxes. The largest free trade zones are in Barcelona, Cadiz, and Vigo, and the entire province of the Canary Islands is a Special Economic Zone. Others vary in size from a simple warehouse to several square kilometres. Spanish customs legislation allows companies to have their own free trade areas. Duties and taxes are payable only on those items imported for use in Spain. These companies have to abide by Spanish labour laws. These zones offer benefits such as a reduced corporate tax rate (of 4%), reduced VAT (7%), as well as transfer tax and stamp duty exemptions.
Government bodies that grant aid and incentives:

- MINHAP - Ministry of Finance and Public Administration

- MINETAD - Ministry of Energy, Tourism, and Digital Agenda

- ENISA - National Innovation Company S.A. (under MINECO)

- AXIS ICO Group (under MINECO)

- INVEST IN SPAIN (under MINECO)

- RED.ES (under MINETDA)

- IDAE - Institute for Energy Diversification and Saving (under MINETDA)

- CERSA - Spanish Guarantee Company S.A. (under MINETDA)

- CDTI - Center for Industrial Technological Development (under MINECO)

- Tripartite Foundation for training in employment (under Ministry of Employment and Social Security)

- CESGAR - Spanish Confederation of Mutual Guarantee Companies
Spain’s central government provides numerous financial incentives for foreign investment, generally designed to complement European Union financing.

Spain provides certain subsidies for job training and job creation, although they have been recently reduced due to budget constraints.

Projects designated as Investment and Employment may be eligible for further subsidies from the Government Public Employment Service (formerly the National Employment Institute).

Labour law reforms adopted in 2012 increased hiring bonuses for youth and long-term unemployed.

In 2014, the Council of Ministers approved a royal decree-law to promote employment and permanent contracts with a new ‘flat rate’ for Social Security contributions. The measure applies to contracts signed after February 25, 2014.
Spain’s 17 regional governments, known as autonomous communities, provide additional incentives for investment in their region. Many are similar to the incentives offered by the central government and the EU, but they are not all compatible.Generally, the regional governments are responsible for the management of each type of investment. No investment project can receive other financial aid if the amount of the aid granted exceeds the maximum limits on aid stipulated for each approved investment in the legislation defining the eligible areas. Therefore, the subsidy received is compatible with other aid, provided that the sum of all the aid obtained does not exceed the limit established by the legislation of demarcation and EU rules do not preclude it (incompatibilities between Structural Funds).

Types of incentives available:

- Financial loans and subsidies
- Exemption from certain taxes
- Preferential access to official credit
- Reduction of burdens, with social security discounts to companies
- Bonuses for acquisition of certain material
- Customs exemption for certain imported goods
- Real estate grants, and gratuitous or favourable land grants
- Guarantees granted in credit operations
- Loans with low interest, long maturities, and grace periods
- Guarantee of dividends
- Professional training and qualification
- Indirect aid by means of supplying infrastructure facilities (access, services, communications, etc.)
MunicipalitiesMunicipal corporations may offer incentives to direct investment by facilitating infrastructure needs, granting licenses, and allowing for the operation and transaction of permits. Municipalities such as Madrid offer numerous support services for potential foreign investors. Local economic development agencies often provide free advice on the local business environment and relevant laws, administrative support, and connections to human capital in order to facilitate the establishment of new businesses. Spain recently made starting a business easier by eliminating the requirement to obtain a municipal license before starting operations and by improving the efficiency of the commercial registry.
Research and Development (R&D)Incentives from national, regional or municipal governments and the European Union are granted to Spanish and foreign companies alike without discrimination. These incentives include most notably those aimed at fostering innovation, technological improvement (TI) and R&D projects, which have been one of the main priorities of the Spanish authorities in recent years. The Science, Technology and Innovation Law 14/2011, of June 1, 2011, establishes the legal framework for the fostering of scientific and technical research, experimental development and innovation in Spain. In 2013 the Council of Ministers approved ‘the Spanish Strategy for Science and Technology and for Innovation’ for the 2013-2020 period, whose essential purpose is to promote the scientific, technological and business leadership of the country as a whole and to increase the innovation capacities of the Spanish company and the Spanish economy. The beneficiaries may be individuals, public research agencies, public and private universities, other public R&D centres, public and private health entities and institutions related to or assisted by the National Health System, certified health research institutes, public and private non-profit entities (foundations and associations) engaging in R&D activities, enterprises (including SMEs), state technological centres, state technological and innovation support centres, business groupings or associations (joint ventures, economic interest groupings, industry-wide business associations), innovative business groupings and technological platforms, and organisations supporting technological transfer and technological and scientific dissemination and disclosure. The aid can take the form of subsidies, loans, venture capital instruments, and other instruments (tax guarantees and incentives).

Source: Spanish Government Sources, Fitch Solutions

8. Taxation – 2018

  • Value added tax: 21%
  • Corporate income tax: 25%

Source: PwC Taxes at a Glance 2018

8.1 Important Updates to Taxation Information

The following significant amendments have been made to Spanish law on the taxation of companies: On June 28, 2017, Law 3/2017, the General State Budget for 2017, was published in the Official State Gazette. The main measures contained in this law that affect companies' taxes were: for tax years commencing on or after January 1, 2017, the percentages and limits applicable to tax credits for investments in cinematographic productions, audio-visual series, and live performances of performing and musical arts were increased; there was a reduction of the VAT applicable to live cultural events (this includes theatres, circuses, bullfights, concerts); the rate applicable to services provided on or after June 29, 2017 was changed to 10% instead of 21%.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax Rate25%
Capital Gains Tax Rate25%
Branch Tax Rate
25%
Withholding Tax- Dividends 19%
- Interest 19%
- Royalties from Patents, Know-how, etc. 24%
Branch Remittance Tax19%
VAT- Standard VAT rate: 21%
- Rate on certain products and services classified as necessary 10%
- Rate on basic products 4%
Capital duty on reductions and liquidations of companies1%

Source: PwC Tax Summaries 2018
Date last reviewed: August 29, 2018

9. Foreign Worker Requirements

9.1 Working Permit

Non-EU member citizens require a work permit in order to work within the country; EU member citizens do not require a work permit, but their employer must inform the job office about their being hired. Citizens of the European Economic Area (with EU member states, Iceland, Norway and Lichtenstein) and Switzerland do not require a visa to enter, reside and work in the country. No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in  Spain or have blue or green cards.

9.2 Obtaining Foreign Worker Permits

Employers must first apply for a permit to hire foreign workers. A permit is granted once no suitable candidate can be found in Spain or in other EU member states. The vacant position must be reported to the local district Labour Office and cannot be changed at a later stage to fit the profile of a potential employee. The candidate must then apply for a work permit. The government issues the permit for maximum of two years, which can be repeatedly prolonged, but always for maximum of two years and may be renewed as many times as needed. The permit process takes an average of one month.

9.3 Green Card

The Green Card system only applies to citizens from the following nations: Australia, Montenegro, Japan, Canada, South Korea, New Zealand, Bosnia and Herzegovina, Macedonia, United States of America, Serbia, and Ukraine. The Green Card simplifies entry to the job market for foreigners who have qualifications for which the state has a job opening in register of jobs suitable for green cards. The permit is for long-term residence for employment purposes.

9.4 Blue Card

Intended for the stay associated with the performance of a highly qualified employment. A foreigner holding a blue card may reside in the country and work in the job for which the blue card was issued, or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education which has lasted for at least three years. The blue card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, however for the maximum period of two years. The blue card can be extended. One of the conditions for issuing the blue card is a wage criterion - the employment contract must contain gross monthly or yearly wage at least at the rate of 1.5 multiple of the gross average annual wage.

9.5 Short-Term Work Visa

These can be granted by the embassy upon an application for maximum period of 90 days, which can be used within 180 days. The visa must be for the purpose of employment and the application must be submitted, beside general requirements, with work permit, employment contract, and proof of secured accommodation.

Source: Ministry of the Interior of Spain, Visa on Demand, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Baa1 (stable)13/04/2018
Standard & Poor'sA- (Stable)
23/03/2018
Fitch Ratings
A- (Stable)13/07/2018

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
33/189
32/190
28/190
Ease of Paying Taxes Index
60/189
52/190
34/190
Logistics Performance Index
23/160
N/A
17/160
Corruption Perception Index
41/176
42/180
N/A
IMD World Competitiveness34/61
34/63
36/63

Source: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World ranking
201620172018
Economic Risk Index Rank52/202
Short-Term Economic Risk Score
65.6
64.4
65.2
Long-Term Economic Risk Score61.4
62.3
64.4
Political Risk Index Rank44/202
Short-Term Political Risk Score
69.2
65.0
64.6
Long-Term Political Risk Score76.9
76.9
74.9
Operational Risk Index Rank21/201
Operational Risk Index Score69.8
72.6
72.1

Source: Fitch Solutions

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
Despite gradually slowing, real GDP growth in Spain will outpace most of the eurozone in the years ahead. But significant challenges lie ahead. We still think the country needs to implement further significant structural reforms aimed at boosting competitiveness in key export-orientated industries, to lower labour costs and to boost labour market flexibility. The current minority government is also unlikely to show considerable willingness to implement such reforms after years of painful austerity and the lack of a governing majority. As such, we expect Spain’s growth to moderate, although it will come in above Eurozone average.

OPERATIONAL RISK
The Spanish economy will gradually lose steam over the coming years, largely as the economy begins to hit the limits of supply. Further headwinds will also build, including weak productivity gains, tighter monetary policy, a weakening demographic profile and weaker external demand.

Source: Fitch Solutions
Date last reviewed: August 31, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: Spain short term political risk index
Graph: Spain short term political risk index
Graph: Spain long term political risk index
Graph: Spain long term political risk index
Graph: Spain short term economic risk index
Graph: Spain short term economic risk index
Graph: Spain long term economic risk index
Graph: Spain long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 21, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Spain Score72.1
59.0
67.4
80.9
81.3
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)17
18
20
9
19
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)17
18
20
9
19
Global Average49.749.850.049.349.9
Global Position (out of 201)21
40
40
9
23

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Spain vs global and regional averages
Graph: Spain vs global and regional averages
Country
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
Switzerland79.976.577.673.991.8
Denmark79.6
75.4
75.8
83.3
84.0
Netherlands79.1
64.5
77.9
85.5
88.4
Sweden78.7
67.6
77.8
85.5
83.8
US78.2
79.0
75.2
88.0
70.5
New Zealand78.0
73.0
75.7
73.8
89.4
Canada77.5
75.2
71.8
80.7
82.1
UK77.3
72.1
78.1
77.9
81.3
Norway77.3
62.7
72.6
81.5
92.3
Finland75.2
53.0
73.5
83.2
91.2
Japan74.9
68.8
64.9
81.4
84.7
Luxembourg74.4
52.1
77.7
78.9
88.9
Ireland74.1
65.0
77.8
71.2
82.5
Austria74.1
58.6
71.6
77.9
88.3
Australia73.5
68.0
71.4
70.3
84.3
Germany73.0
63.4
69.5
77.4
81.7
Spain
72.1
59.0
67.4
80.9
81.3
Belgium
72.1
55.3
76.5
81.4
75.3
France
71.5
60.2
70.3
79.9
75.5
Portugal70.6
50.8
66.5
80.2
85.0
Iceland70.4
59.9
66.2
69.1
86.6
Liechtenstein69.5
54.7
79.5
61.1
82.6
Israel66.7
72.4
63.0
69.1
62.4
Malta65.2
52.4
69.6
58.5
80.1
Isle of Man65.0
62.0
61.8
53.9
82.3
Italy63.1
53.9
57.6
72.3
68.7
Greece58.253.147.868.863.2
Developed Markets Averages72.9
63.3
70.9
75.8
81.8
Global Markets Averages49.7
49.8
50.0
49.3
49.9

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Spain

Graph: Major export commodities to Spain (2017)
Graph: Major export commodities to Spain (2017)
Graph: Major import commodities from Spain (2017)
Graph: Major import commodities from Spain (2017)
Graph: Merchandise exports to Spain
Graph: Merchandise exports to Spain
Graph: Merchandise imports from Spain
Graph: Merchandise imports from Spain

Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions


2017
Growth rate (%)
Number of Spanish residents visiting Hong Kong62,775
-1.86
Number of Spanish people residing in Hong Kong407N/A

Visitor numbers Source: Hong Kong Tourism Board
Resident numbers Source: United Nations Population Division, Fitch Solutions


2017
Growth rate (%)
Number of European residents visiting Hong Kong1,929,824
-0.2

Source: Hong Kong Tourism Board
Date last reviewed: August 31, 2018

11.2 Commercial Presence in Hong Kong


2017
Growth rate (%)
Number of Spanish companies in Hong Kong28
N/A
- Regional headquarters10
- Regional offices18
- Local officesN/A

Source: Hong Kong Census and Statistics Department

11.3 Treaties and agreements between Hong Kong and Spain

As an important step in accommodating greater synergies, Hong Kong and Spain signed a Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) on April 1, 2011, which came into force on April 13, 2012.

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

Spanish Chamber of Commerce, Hong Kong

Address: 1801-03, 18/F, East Town Building, 41 Lockhart Road, Wan Chai, Hong Kong
Email: info@spanish-chamber.com.hk
Tel: (852) 2763 6236

Source: Spanish Chamber of Commerce in Hong Kong

Spanish Consulate General in Hong Kong

Address: Suite 5303, 53/F, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong
Email: espcghk@netvigator.com, cog.hongkong@mae.es
Tel: (852) 2525 3041

Source: Consulate General of Spain in Hong Kongg

11.5 Visa Requirements for Hong Kong Residents

A Schengen Visa is needed for travel to Spain and is valid for up to 90 days. Application must be completed prior to travel.

  • Holders of Hong Kong SAR, BN(O) and Macao SAR passports are entitled to a visa-free entry to Schengen countries lasting no more than 90 days in any six-month period from the date of first entry in the territory of the Member States.
  • Both the Hong Kong Document of Identity (HKDI) and the Macao Travel Document are recognised by all Schengen countries. The holders of such documents, however, need to apply for a Schengen visa.

Content provided by Picture: Fitch Solutions – BMI Research
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