The last will be the first. This is a bit of what has happened to Spain’s economy since the covid pandemic. Spain suffered the worst recession in the euro zone and one of the largest in the world. However, currently, the national economy has presented a more powerful recovery than the large economies of the euro zone and the comparison is made from 2022, Spain is starring in one of the most intense ‘mini-cycles’ of growth in the world. developed world, as revealed in a graph published by the S&P Global agency in its forecast report for 2025. More intense population growth, strong job creation, tourism boom and a very intensive productive sector in the sectors that have performed better after covid, have generated this curious situation in which Spain appears ahead of the US, France, Germany or Belgium.
In the rating agency’s graph you can see that the accumulated growth of Spain’s economy since 2022 far exceeds that of the rest of the large developed economies. S&P analysts have decided to remove 2021 from the equation, which was the year after the pandemic, because during that year the economies that fell the most during the covid enjoyed a rebound effect that would distort the figure (Spain would have even more advantage) .
In this way, S&P analysts have calculated the accumulated GDP growth (percentage points) from 2022 to 2024, both inclusive, and the result is evident. Spain’s economy is approaching 12 points of accumulated GDP (taking into account that this 2024 it will grow more than 3%), while that of the US, in second place in the ranking, has grown about 8 points accumulated. Then the European economies appear at a great distance, leaving Spain as the big winner among the most important countries in the developed world.
Despite eliminating the year 2021, Spain’s economy also has a slight advantage because in 2022 it was still witnessing a recovery/rebound effect from the 10.8% drop in 2020. Although Spain’s GDP is much larger than In 2020, 2022 was still a take-off exercise due to the reopening of the economy and the greater recovery of tourism. While most economies had already moderated their growth in 2022, GDP in Spain expanded by 5.8%after 6.4% in 2021. The intense fall in the economy in 2020 generated a kind of recovery in two parts or two years, while a good part of Europe and the US made their great recovery in a single year.
The other key that explains this powerful leadership of Spain in GDP growth is the greater scope of Spain’s labor market to generate employment, since the country emerged from the pandemic with an unemployment rate of 16.1%, a large number of idle labor that has been absorbed little by little. Finally, the strong growth of the population (the arrival of foreign labor) that has been expanding this workforce and increasing GDP growth extensively.
Spain leads growth from 2022
He The Bank of Spain itself explained it this way in a report published last week: In the recovery of the Spanish economy, two distinct periods can be distinguished in the comparative evolution of the economy after the pandemic. Until early 2022, it remained slightly behind in terms of recovering to pre-pandemic levels compared to the rest of the large economies, but since then it has experienced more favorable behavior that has led Spain’s economy to appear highlighted in international reports and reports for presenting growth much higher than that of its neighbors for a long time.
What began as a coincidence seems to have become chronic: “In the first quarter of 2022, the unjustified Russian invasion of Ukraine occurred, which triggered the so-called energy crisis and aggravated the rise in inflation that has conditioned the future of European economies. since that moment. Given the nature of this disturbance and the better relative situation of the Spanish economy in terms of diversification of its energy sources and exposure to disruptions in gas supply. coming from Russia, it could be expected ex ante that the relative impact would be less unfavorable for the Spanish economy in the context of the large EMU economies (see Quintana, 2022). Between the fourth quarter of 2021 and the second quarter of 2024, the accumulated GDP growth in Spain has been 8.8%, compared to 2.6% in the case of the EMU“says the BdE document.
According to data collected by the Bank of Spain, GDP growth between the fourth quarter of 2019 and the second quarter of 2024 was sustained mainly by public consumption and net foreign demand. Specifically, the joint contribution of these two components explained 4.5 percentage points (pp) of a 4.7% increase in GDP (2.2 pp of net foreign demand and 2.3 pp of public consumption). “In qualitative terms, this composition of growth remains unchanged after the revisions of the national accounting, with public consumption and net foreign demand being the two components that practically explain GDP growth in Spain since the pandemic.”
Specifically, of the accumulated growth of 5.7% between the fourth quarter of 2019 and the second quarter of 2024, the contribution of public consumption explains 3.1 pp and that of net foreign demand 1.5 pp (see Chart 3. to). However, there have been some non-negligible changes in some of the components of demand. In particular, the upward revision of GDP is mainly explained by the greater contributions of public consumption and investment or gross fixed capital formation. Thus, most of the GDP revision is explained by the increase in the contribution to growth of domestic demand – it was revised upwards by 1.8 pp –, while the contribution of net foreign demand shows changes of lesser magnitude. and of the opposite sign—it was revised 0.8 pp downwards.
Relatively sustainable growth
There is no doubt that Spain’s economy is experiencing a sweet moment, at least as far as ‘macro’ indicators are concerned. This Monday, the Fitch rating agency published a report that highlights all the positive points that are leading the national economy to surpass most European countries in growth. If you could travel back in time and show this report to the economists from 2006-2007, no one would believe that Spain is the country that is the protagonist of said document. The national economy is growing strongly, generating large amounts of employment, while inflation is under control, public debt is gradually reduced, the competitiveness of the productive sector is maintained, the current account surplus is maintained and exports are growing faster. than those of Germany, Italy or France. What’s more, in terms of GDP, Spain already exports much more than France or Italy. This Spain is different.
Why is this Spain very different? During the growth cycle that began with the end of the crisis of the 90s, Spain achieved very powerful economic growth. However, this increase in GDP hid growing imbalances (the largest current account deficit in the world, Spain was growing in the heat of credit that came from abroad) that would end up leading the national economy to the biggest crisis seen in decades: a financial crisis. seasoned with a sharp recession and the bursting of a real estate bubble. Everything achieved in more than a decade vanished in a few years. Now, Spain’s economy seems different. The construction and real estate sector has a lower weight, the economy is a net creditor (Spain finances the rest of the world) while exports of goods and services are increasingly important. Meanwhile, the labor market generates hundreds of thousands of jobs each year.
Now, exports, investment and public consumption are the driving forces behind GDP, which is allowing the growth of the economy to be more balanced and sustained over time. However, the OECD published this week that in the coming years, the Spanish economy will manage to maintain growth thanks to the greater pull of consumption, something that is more similar to what happened in the period 1999-2008, but that for now is not dangerous, since this consumption will not be based on debt, but is based on a previous increase in savings and disposable income.
All in all, the rating agency Fitch Ratings has revised upward the forecasts for Spain’s potential GDP to an average of 2% during the period 2024-2028 thanks to supply-related factors, such as the drop in structural unemployment and the creation of employment, but also productivity. According to the report published this Monday, the country will grow around 3% this year and will continue to do so above 2% between 2025 and 2026, although a subsequent slowdown will average 2% until 2028.
For its part, S&P, the author of the report that gives rise to this news, indicates that Spain’s economy will grow 3.1% this year, 2.5% next year, and double 2% for 2026 and 2027. For the euro zone as a whole, the situation is somewhat more complex given the stagnation of Germany and France, the economies that account for 50% of the entire GDP: “We project GDP growth in the euro zone. eurozone of 0.8% in 2024 and 1.2% in 2025, with Germany lagging behind its peers and Spain, which continues to surpass them.
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