Spain's economic stability has not been enough to attract the attention of international businessmen, as confirmed by data published this Monday by the Secretary of State for Commerce. In one year, foreign investment fell almost 20%, barely exceeding 28 million euros. It is the worst figure since the outbreak of the pandemic in 2020, despite the fact that the Ministry of Economy has assured that it is at the average for the last five years. The figure suggests that the tightening of financial conditions in the second half of the year, political uncertainty and the poor economic performance of the continent could have conditioned this fall.
These figures accompany the poor evolution of general investment, which continues to be unable to restore pre-pandemic levels. In 2019, gross fixed capital formation in Spain – which is the way investment is measured – exceeded €255 billion, according to Eurostat data. By 2023, the figure was still almost 4% below, as it did not reach 246,000 million. It is one of the few countries in the European Union, along with Germany, that has not yet recovered pre-covid levels. If you look in detail at the photograph extracted from the data from the National Institute of Statistics (INE), you can see that all sectors of activity that make up gross capital formation suffer the same inability to reach pre-2019 levels.
54.3% of total foreign investment was allocated to the services sector, 42.2% to the industrial sector and 3% to construction. According to the ministry, investment projects aimed at “increasing productive capacity and employment” increased by 12%, reaching 5.68 billion euros. The greatest progress in this area was obtained in the last quarter of the year, with a rebound of almost 80% in gross terms. The distribution of the money corresponds to the country's sectoral cut. For this reason, the services sector usually accounts for more than half of the money invested in the country, according to official figures. Once again, the United States has been the first issuing country of these flows, with 28.9% of the total. It was followed, as usual, by the United Kingdom (13.1%), Germany (10.6%) and France (9.2%). The figures, in any case, break the growth trend that the country has been experiencing in recent years and which led to the second highest rate in the entire historical series, which dates back to 1993, in 2022.
The Community of Madrid continues to be the main destination for more than half of foreign investment. Catalonia occupied second position and the Valencian Community placed third, with an increase in foreign investments in both regions. On the other hand, the blow has been suffered by the Basque Country, where in one year the country has gone from having 15% of the capital to only 5%.
Despite the fall, the Government has specified that the figure reached demonstrates the “strength of the Spanish economy and the confidence that investors have” despite an international context marked by great uncertainty. And 2023 has indeed been a gray year for Europe, unlike the United States, where the tax exemptions and other incentives implemented by President Joe Biden have kept investor interest afloat. A report from the United Nations Conference on Trade and Development noted in this regard that, although foreign direct investment defied expectations and grew by 3% globally, it was only in a small group of economies. When they are taken out of the equation, it is observed that in the European Union investment registered a drop of 23%.
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