It can be argued whether Spain is doing well, but what is certified is that throughout 2023, the Spanish economy is doing better than the rest of Europe. While sluggishness or even downward revisions to GDP growth reign in the euro zone, with Germany among the countries with the worst performance, the Spanish economy is performing positively.
It is true that it is largely due to the excellent performance of the first half of the year and that now the momentum is slowing down (this Friday the leading indicator for the third quarter will be known and the forecasts are for minimal growth, one or two tenths). However, this is the general trend throughout Europe and does not stop the forecasts of growth in the Spanish economy this year of around 2.3%.
In any case, the Bank of Spain has today identified the reasons for this difference in Spanish behavior with that of its European neighbors. There are basically three: the greater weight of tourism in the Spanish economy, a sector that continues to have a very high demand; the lesser importance of manufacturing, with lower dynamism; and the more limited trade relationship with China, whose slowdown is one of the causes of the global slowdown in the economy.
“The sectoral composition of the Spanish economy and that of the euro area would justify part of the greater recent dynamism of activity in our country,” concludes the article The greater resilience of the Spanish economy compared to the euro area in 2023, published this morning by the Bank of Spain.
For example, on the topic of services, it is observed that tourists have continued to experience very high demand since the economic reopening after the pandemic. If by cutting off freedom of movement with Covid we paid the bill more than anyone else, now the strength of the sector places us better. In this area, the greater weight in the gross added value (GVA) in services linked to the tourism sector, such as passenger transport, hospitality and leisure, contrasts, which reaches 11.4% in Spain, compared to 7.3%. % of the euro zone or 5.3% of Germany.
On the other hand, manufacturing has a lower weight in Spain, 2.5%, compared to the euro zone (2.7%) and even more so if we look at Germany (3.3%). Here, the sectors that have shown the most weakness are the most intensive in energy use, due to the increase in prices that have suffered since 2021. In this area, Spain suffers the impact less, and on the other hand, Germany is more affected by direct exposure from German industry to Russian gas. It is the consequence derived from the policy followed for years of depending largely on Russia in energy matters, valuing price much more than geostrategic issues.
The third reason that makes the difference is the lower Spanish exposure to China, an economy in the process of deceleration. Although Spain has increased its exchanges with China in recent years, reaching 1.2% of GVA in 2018, this dependence is practically half that of the eurozone (2%), and is still further away from from Germany (2.7%).
These are the arguments that explain the situation so far and looking to the future, the evolution will depend on how the lower growth in manufacturing is transferred to services, and also on whether the strength of the tourism sector is limited by the end of summer and the demand depletion after the pandemic.