The economic growth that Spain experienced in the first half of the year slowed down in the summer, advancing only 0.3% in the third quarter (from July to September). The Gross Domestic Product (GDP) grew by 0.5% in the first two quarters, mainly due to the boost in private consumption and exports, but as summer approached the economy cooled due to the rise in interest rates. interest and the high inflation that continues to affect families in key items such as food.
Despite the obvious slowdown, growth is maintaining its pace, which is why the Government indicates that the economy has maintained “dynamism and differential growth” by achieving a “very notable” figure in a context of so much international uncertainty and rising rates. In this way, Spain continues to be one of the fastest growing countries in the eurozone and the Executive trusts that the 2023 objectives included in the Budget Plan will be met, which estimates GDP growth this year of 2.4%.
The 0.3% increase is fundamentally based on national demand, increasingly affected by prices that have been at very high values for a year and a half. Data from the INE ensure that household final consumption spending advanced 1.4% in the third quarter, significantly above the rest of the year and showing its best figure since 2022. In addition, tourism contributed much of the growth in a record summer, with income even above that of 2019, before the pandemic broke out.
On a year-on-year basis, the Spanish economy grew by 1.8% between July and September, which represents a reduction of two tenths compared to the previous quarter and a considerable drop from the 4.1% with which the year began.
The good evolution of employment is supporting private consumption that after the summer will show its slowdown more forcefully. The EPA data published this Thursday surprised on the upside, with a growth of 210,000 jobs this summer, triple that of a year ago.
Statistics data confirm that the Spanish economy has generated 678,000 new jobs in the last year, with a growth of 3.5%, above the GDP growth level. The note published by the INE indicates that this behavior is explained by “the combined effect of the variation in hours worked and the reduction in the average working day in full-time jobs.” For its part, the average remuneration of workers grew by 4.2%, slightly below the 5.2% in the second quarter.
Target: 2.4% growth this year
In the first two quarters the economy performed very positively, placing Spain as one of the large economies with the best performance compared to the sluggishness of other partners, such as Germany, almost in recession. For the year as a whole, the Bank of Spain’s estimate is for a 2.3% increase in GDP, estimating a weaker third and fourth quarter, which would compensate for the good start to the year. In fact, calculations by MIPred, the tool of the Fiscal Authority (Airef) that gives a real-time estimate of GDP growth, indicate that the economy is already declining by 0.2% in the second week of October.
The Government’s forecasts sent to Brussels a few weeks ago estimate that the Spanish economy will grow by 2.4% this year, but that next year it will slow down to 2%. These are optimistic forecasts if compared with those of the rest of the national and international organizations, especially in the case of the estimate for 2024, the year in which the OECD assured this week that the economy will grow only 1.5% and the Tax Authority foresees 1.7%.
The INE data already incorporates different revisions that affect previous quarters and confirms that Spain recovered its pre-pandemic GDP level before the end of 2022, a year ago now. At that exact moment, the GDP level exceeded the level at the end of 2019 for the first time in three years, just before the economic ‘shock’ caused by the pandemic.
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