The Spanish economy closed 2023 on a good note and faces this year with favorable prospects. GDP grew by 2.5% in the last year, well above an anemic euro zone, and with a better-than-expected end to the year. The INE confirmed this morning its advance data that already indicated this increase in GDP, marking an upward trend at the end of the year. The GDP trajectory in 2023 has been two first quarters growing by half a point, to remain at 0.4% in the third and rise to 0.6% in the last three months. A final push that leaves the economy well positioned to achieve growth of around 2% this year, which is the forecast managed by the Government.
2023 is saved by the boost in consumption, both private and public administrations, which makes it possible to overcome even the most negative element, such as the fall in investment in the second part of the year. Regarding household consumption, it grew by 1.8% in 2023 as a whole, but faltering in the final stretch, and recovers the levels of 2019. For its part, public consumption is the concept that has increased the most, with 3.8%. And investment grew by 0.8%, although it has fallen in the last two semesters and is still below 2019 levels.
“The most negative points of these figures are the excessive contribution of public consumption and that investment shows signs of great weakness,” explains María Jesús Fernández, senior economist at Funcas.
If the structure of the Spanish economy, highly dependent on services and tourism, paid dearly for the pandemic, with a more pronounced fall in GDP than its European neighbors; Now, the lower weight of the manufacturing industry and greater energy autonomy allow it to achieve growth rates much higher than those of the euro zone. This is also helped by the good performance of the labor market, which allows us to predict that this spring there will most likely be 21 million Social Security affiliates.
The 0.6% growth in the fourth quarter is good data, but when analyzing it in detail, some nuances appear. The main one is that family consumption is slowing down, and remains at 0.2%, six times less than in the previous quarter, and on the other hand, the boost in public administration spending stands out, at 1%. This public spending cannot foreseeably be maintained in 2024 at a time when it is time to return to fiscal orthodoxy, and with it, control the level of deficit and debt. A second worrying element is the 1.6% drop in investment in the last quarter, and this despite the deployment of European recovery funds, which are supposed to stimulate it.
The stronger-than-expected end of 2023 will cause a carry-over effect into the current year, so that both the Bank of Spain and various think tanks have already begun an upward correction of the growth forecast, placing it at around 2% in 2024, which is the figure that the Government has indicated.
The Minister of Economy, Carlos Body, has stated that these data demonstrate “the good progress of the Spanish economy, in the face of catastrophic predictions and biased stories, the figures are clear and incontestable.” Body highlights that this 2.5% growth last year is more than five times higher than the euro zone average and the highest among the main European economies. He also points out other positive data such as that membership is close to 21 million, the moderation of inflation and that the deficit closed last year at 3.7%, improving the forecasts.
