Spain | Vulnerabilities in value chains due to COVID-19

Summary

The disruption of value chains, due to COVID-19, may be one of the factors slowing down the recovery of the Spanish economy in the coming months. The manufacturing sector would be the most exposed due to its high degree of dependence on foreign inputs.

Key points

• Key points:
• Global measures to limit the spread of COVID-19 could lead to disruptions in supply chains, resulting in a sluggish recovery.
• Spanish companies could face a shortage of imported inputs necessary for their activity, with the manufacturing industry and, therefore, the export of goods, being the segments of supply and demand that could be most affected given their high dependency on foreign intermediate goods.
• Within the manufacturing sector, the automotive, chemical, pharmaceutical and textile subsectors could be the most vulnerable, because of the complex links in their value chains.
• In some sectors, spending cuts will be sufficient to generate an accumulation of inventories, which will satisfy demand when it is restored. In other sectors, increases in the prices of scarce goods or their replacement by similar products could be observed, which will reduce the overall welfare.

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