Spain's economy will grow by 2.5% in 2023, five times faster than the euro zone

Spain's gross domestic product (GDP) grew by 2.5% last year despite onslaught of inflation and interest rate hikes.

The figure is slightly higher than the government's expectations, as well as those of the Bank of Spain, the OECD and the European Commission, but they are a few tenths of a percentage point lower. Last year was marked by high inflation and rising interest rates, which caused mortgage prices to rise, albeit at more moderate levels than in 2022.

But despite these hurdles, economic growth has now risen for the third year in a row. However, last year's growth was the slowest at the time. GDP in 2021 increased by 6.4%. In 2022, it grew by 5.8%. Last year it increased by 2.5%. This three-year growth for him follows his 11.2% plunge in 2020 due to the COVID-19 pandemic. By the end of 2023, GDP will already be almost 3% higher than before the pandemic. GDP at current prices was 1,462 billion euros, an increase of 8.6% compared to 2022.

According to these figures, Spain's economy grew much faster than its European neighbors. It grew five times faster than the Eurozone and the European Union (0.5%, according to Eurostat), and far ahead of major countries such as France (0.9%), Italy (0.7%) and Germany (-0.3%). Affected by the energy crisis.

The last quarter of this year saw an unexpected boom, with growth of 0.6% compared to the previous quarter, significantly higher than the 0.3% expected by the Bank of Spain. In response to this favorable record, the government has updated its forecast for the end of 2024, estimating that the economic growth rate will increase by 1.9% this year, 1.9% in 2025, and 1.7% in 2026. Meanwhile, the government forecasts economic growth rate of 2% in 2020. 2024. BBVA Research predicted GDP growth rate of 2.1%.

The main driver of GDP growth was domestic demand, which contributed 1.7 percentage points to growth in 2023, but was still 1.2 percentage points lower than in 2022. According to INE data, two-thirds of growth will come from domestic demand and one-third from external demand. Household consumption is thus the driving force of the economy, but not only are there record numbers of tourists (85 million foreign visitors, exceeding pre-pandemic numbers), but also the economic contribution of foreign tourists. In the year seen, tourism traction is also evident. Tourism sector as a percentage of GDP (187 billion euros according to Exceltur calculations).

employment resilience

Despite rising interest rates and high inflation, household consumption has remained at such high levels, mainly due to a strong job market, with 780,000 jobs created last year and Almost 4 in 10 new jobs were created in Spain. Wages also rose by an average of 5.3%, outpacing the rate of inflation.

The Ministry of Economy said the statistics published by INE on Tuesday, March 27 “confirm the good progress of the economy.” Minister Carlos Cuerpo said: “In contrast to catastrophic predictions and biased stories, the numbers are clear and incontrovertible.” He added that about 21 million people enrolled in the social security system last year, pointing out that the inflation rate has fallen by 8 percentage points in just 18 months since its peak in summer 2022, when it reached 10.8%.

Spain ranks last in the league in terms of purchasing power

However, this positive figure stands in stark contrast to the everyday economy of Spaniards, who are facing increasing price pressures. Spain remains below the EU average in terms of purchasing power and has not recovered to pre-pandemic levels, according to per capita GDP data released by Eurostat on Tuesday. Spain reached the level of 89% of the EU standard (100) in 2023 after narrowing the gap by 3 points compared to 2022, but still below the 91% in 2019.

Spain ranks 16th. Although Spain has gradually improved in recent years, it remains below its pre-pandemic level of 91% in 2019, after falling to 83% in 2020, and the pre-global financial crisis peak of 105 in 2006. % is much lower than that. From 2002 to 2009, Spain managed to maintain a level of purchasing power income above the EU average.

The EU countries with the highest purchasing power are Luxembourg (140%) and Ireland (112%), followed by the Netherlands, Denmark and Austria. At the other end of the spectrum is Bulgaria, which has the lowest GDP per capita, followed by Greece and Latvia.