After a revision that showed the Spanish GDP being 2.5% higher than initially estimated, it is necessary to rethink the diagnosis of the strengths and weaknesses of the Spanish economy. Looking at Europe as a reference point provides some relevant information in this regard. Over the last four years, the Spanish GDP has grown by 3.6%, nearly the same as the eurozone average of 3.5%. However, this growth hides two distinct periods, one marked by the blow of the pandemic, more damaging in Spain, and another post-war in Ukraine: since then, growth has consistently been higher than the European average, widening the gap. While the European economy shows signs of stagnation, the Spanish economy continues to strengthen its progress, indicating a positive competitiveness shock.
It can be inferred that the energy crisis has had a lesser impact in Spain compared to neighboring countries, possibly due to the availability of affordable alternative energy sources or the relatively smaller weight of the industry in the economy. The behavior of the Spanish economy, as currently understood, is consistent with the emergence of a positive competitiveness shock, the strength of which may not have been fully appreciated. This exceptional view aligns with the accumulation of external surpluses, particularly in trade with the rest of the European Union. Additionally, the strength of the Spanish economy is also evident in its public consumption, accounting for 2.5 percentage points of growth and being a significant factor in the GDP increase recorded between 2019 and 2023.
Despite the favorable state of the economy, the weakness in investment, with a negative contribution to GDP compared to a slight increase in Europe, is concerning. The revised data also suggest a deceleration in the last two years in terms of investment in real estate and capital goods. There is a risk of a chronic deficit in productive investment, as without new policy initiatives, it may be challenging to resolve housing shortages or adapt the production system to global and environmental challenges. While an additional cut in interest rates may help, more direct action is needed to address underlying obstacles in the housing market and sectors like automotive. The revisions also highlight the gap between positive macroeconomic figures and the loss of purchasing power felt by many people.
In conclusion, the Spanish economy is currently experiencing a good conjuncture, but the momentum is insufficient to address major economic and social imbalances. Merely riding on the current expansion is not enough, and disconnecting from the struggling European economy is not feasible. The straightforward diagnosis provided in Mario Draghi’s recent report on the European economy also applies to Spain. Raymond Torres, Director of Economic Analysis at Funcas, highlights these key points, emphasizing the need for a comprehensive approach to sustain and enhance the current economic progress in Spain.
