An index of external positioning for the Spanish economy

In this paper we analyze the external economic positioning of Spain by developing a composite indicator (IPEX). This index takes into account external trade in goods and services, and tourism revenues, as well as foreign direct investment (FDI) assets, and is built up through a principal components analysis. We examine the evolution over time of the IPEX and compare it with the IPEX of some of Spain’s major economic partners and with a world aggregate. The results show that Spain is positioned mainly in developed countries which are geographically close, such as the United Kingdom, the country with the highest weight in the Spanish IPEX, ahead of France, our most important trading partner. The emerging market economies have, overall, a lower weight than in the world aggregate, with the exception of Latin America, due to Spanish FDI assets in the region. Moreover, in recent years the weight of emerging economies in Spain’s external positioning has increased, although at a slower pace than in the world aggregate. The comparatively low positioning in emerging markets may limit, in principle, Spain’s ability to take advantage of the most dynamic global growth trends in some of these countries, located mainly in Asia. However, when we introduce risk considerations into the analysis, the above-mentioned results are qualifi ed, since emerging economies have generally higher risk levels