The latest economic data in Spain this week has offered some good news amidst a backdrop of intense political conflict. Despite the challenging political environment in Europe, Spain has defied pessimistic forecasts and surpassed analysts’ expectations. The country is leading in terms of economic performance, with a GDP growth rate of 2.5% in 2023 and a projected growth rate of 2% for the current year. Household consumption, driven by population growth and increased public spending, has been a major factor in this growth. Additionally, the services sector has shown strong performance, particularly in non-tourism related activities, indicating a potential shift in the country’s economic model.
The recovery of exports towards the end of the year, along with a resilient tourism sector that has managed to overcome the impact of the pandemic, are contributing to Spain’s economic growth. The services sector, especially in areas such as information technology, professional services, and consultancy, has seen a significant growth of 25%. This dynamism has led to almost 21 million contributors to the social security system, with tax increases for banks and energy companies not hindering job creation. Wages are also increasing above inflation rates, allowing workers to regain purchasing power. As a result, leading research services have revised their growth forecast upwards for Spain, indicating a positive outlook for the economy.
However, despite these positive indicators, there are still challenges that need to be addressed. Investment has declined for two consecutive quarters, reflecting uncertainty surrounding government policies and economic measures. Spain, along with Germany, has not yet recovered pre-pandemic investment levels, which could have long-term implications for the economy. Public spending, growing at a rate of 3.8%, may not be sustainable as Spain aims to return to fiscal orthodoxy and control deficit and public debt levels. Without a budget for 2024, the country is at a disadvantage compared to others implementing national industrial policies. Negotiating a budget sooner rather than later would be beneficial for all parties involved in order to channel growth and economic change effectively.
As the economy continues to function well without a budget, it is essential for the government to prioritize the negotiation and approval of a budget for the coming year. Budgets are a crucial aspect of a government’s political agenda and serve as a key tool for directing economic growth and transformation. Spain’s strong economic momentum should be supported by a clear fiscal framework that ensures stability and sustainability in the long run. The absence of a budget for 2024 highlights the need for timely and strategic decision-making to steer the country towards a path of sustainable growth and prosperity. It is essential for all stakeholders to work together to establish a budget that reflects the country’s economic priorities and goals.
