The Spanish economy is experiencing an exceptional moment which has attracted the attention of analysts and the international media, including the prestigious Financial Times newspaper. According to a report released Tuesday, “Spain is on track to overtake the United States to become the world’s fastest-growing advanced economy this year, growing more than three times that of the whole of the euro zone. This praise underlines Spain’s fundamental role as an engine of growth in Europe and the robustness of its labor market and its private and public consumption. In addition, the report makes some striking claims: “Germans will have more income, but Spaniards will live better.”
Several economists consulted by the Financial Times They point out that this GDP growth, estimated at 2.7% by 2023, has been driven to a large extent by a set of strong factors such as immigration, tourism, foreign investment and public spending. According to the latest IMF report, an expansion of 2.9% is expected this year, exceeding the US growth forecast of 2.8%. This differential reinforces Spain’s position as the economy with the greatest growth potential among advanced countries. GDP data published this Wednesday confirm this trend. Spain further grew by 0.8% quarter on quarter in the third quarter of the year and 3.4% year on year. So this 2.9% could even end up being insufficient.
After highlighting these good “macro” data, the report FT takes his turn and points his finger at the other side of the economy: “Some Economists say there are downsides to the country’s growth, noting that GDP per capita increases more slowly than overall GDP. The reality is that since 2020, GDP per capita has only increased by 0.1%.
This is partly because 700,000 working-age immigrants joined the job market in the last three years, according to Funcas. They have helped increase the total population from 47.4 million to nearly 49 million, but many of them work in low-skilled, low-paying jobs. Even if the economy grows comprehensively and extensively, this does not generate improvement or prosperity for people who already had jobs. At the same time, government critics say too many Spanish families are struggling with the high cost of living and too few measures have been taken to mitigate the severe cost of living consequences. shortage of affordable housing.
Pedro Sánchez cites the article FT
In the political field, the government led by President Pedro Sánchez took advantage of this context of growth to strengthen its image both nationally and internationally. Sánchez, quoted in the article, said that “Spain is experiencing an extraordinary moment. Our country is experiencing great success,” a statement that reflects the optimism surrounding this economic expansion. However, the Financial Times It also notes that the political opposition has criticized the reliance on public spending-led growth, pointing out that a significant proportion of growth comes from an increase in public consumption.
Despite these conflicting views, international investor confidence in the Spanish economy remains high. According to the Financial Times“on the sovereign bond market, the profitability differential of Spanish and German debt is at its lowest level since January 2022“This fact reflects a perception of lower risk and an improvement in the performance of Spanish debt, which even saw the yield on the 10-year bond fall to 2.98%, below that of France.
Tourism, one of the historical pillars of the Spanish economy, continues to contribute significantly to growth. With a record 85 million visitors last year, the country hopes to exceed this figure in 2024, generating more than 90 billion euros in revenue. However, Carlos Body, Minister of the Economy, highlighted that exports of non-tourism services are growing even faster and are expected to generate 100 billion euros in 2024. According to the Financial Times, “these exports cover services financial, engineering, IT consulting and education, particularly with international students.
In addition to the tourism sector, Spain has established itself as an attractive destination for foreign direct investment (FDI). As of 2019, Spain is the sixth global destination for foreign investment projects, with notable growth in sectors such as renewable energy, motorsport, real estate and electronic components. The Financial Times highlights that “Spain was the destination for 77 new projects in the renewable energy sector last year, placing it first in the world alongside the United States.”
However, the still high unemployment rate, around 11.2%, remains a structural concern. Although Spain reached a record 21.8 million people employed in the third quarter of this year, the quality of the employment created remains a question of analysis. According to the FFinancial time“Most immigrants work in sectors such as agriculture, hospitality and construction, where labor productivity is low.”
Regarding business investment, although foreign investment has remained strong, domestic investment has seen slow growth. Raymond Torres, director of macroeconomic analysis at Funcas, points out that“While, in terms of global comparison, Spain is well positioned, local investors directly perceive political uncertainties.” These divergences reflect an expanding economy, although some areas need improvement.
In the end, the Financial Times concludes that, even if Spanish growth continues to be driven by external factors and immigrationits positive economic performance in a difficult eurozone highlights the country’s ability to attract investment and maintain solid growth. The Spanish economy continues to progress and its position on the international scene continues to strengthen, as this detailed analysis from the British newspaper demonstrates.
