2023-07-25 15:00:41
The Spanish economy continues to grow at a surprising rate, not only for the organizations that are updating their forecasts, but also for the Government itself, which in its macroeconomic calculations predicted an advance in the Gross Domestic Product (GDP) that is now being questioned upwards. The last to do so was none other than the International Monetary Fund (IMF), which in its World Economic Outlook Report (WEO) published this Tuesday indicated that GDP will grow by 2.5% this year, one point more than what was forecast just three months ago by the agency and almost half a point more than what the Government forecasts (2.1%).
The Washington-based organization considers that the fundamental reason for this economic improvement is due to the “greater strength of services and tourism” in Spain. In this summer report, he does not give much more detail about the Spanish economy, but he does compare the situation with the rest of the euro area and points to robust GDP growth in our country. “(Within the eurozone) growth is revised upwards in Italy (0.4 points more) and in Spain, which will advance one point more than expected.” A situation very different from that of other European powers such as Germany, which will enter a recession this year (-0.3%) due to the “weakness of the manufacturing product and the economic contraction in the first quarter.”
Spain will grow more than twice as much as the euro zone as a whole, where GDP will grow by 0.9% in 2023 and pick up again at 1.5% in 2024. Spain’s growth will also be well above that of France (0.8%) and Italy (1.1%), and if we look outside the EU it will also be higher than that of the United Kingdom (0.4%) or the United States (1.8%). The Government values very positively the figures published by the IMF on Spain, since it is “one of the biggest upward revisions”. “Spain will have the highest growth of the main developed economies in 2023 and 2024, with a growth that this year will be almost triple that estimated for the euro zone,” they highlight from the Ministry of Economic Affairs.
Tourism pulls the economy
After two very hard years for the tourism sector, the ‘boom’ experienced since the second half of 2022 and so far in 2023 have allowed it to recover the pre-pandemic figures and even exceed it. Tourism will close the year representing 12.6% of the national GDP, equaling the data of 2019, according to figures from Exceltur. This represents a tourist activity this year of 178,800 million euros, almost 14% more than the income that the sector had in 2019.
The experts explain that tourism continues to be the fundamental leg on which the Spanish economy is based, despite the fact that in the pandemic years some voices called for a reindustrialization of the country so that when the crisis emerged the economy would strengthen and not depend so much on services, but for now it has not been like that.
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María Jesús Fernández, senior economist at Funcas, assures that “the only leg of the economy that has done well are exports, especially those of tourist services.” Thus, the high growth rates at the end of 2022 and the beginning of 2023 have been due to the foreign sector since national demand “has fallen in both periods”, in addition to the fact that investment in equipment has maintained a “worryingly weak” tone even far from pre-pandemic levels; and the evolution of investment in construction has been “even worse”.
Thus, GDP recovered the level of 2019 in the first quarter, but national demand was still 2.5% below the pre-pandemic data, warns the economist, who also emphasizes that the rate hikes will reach their greatest impact in the second half of the year, so “a comeback in national demand is not likely, but rather it will maintain a weak tone.”
-2.5% National demand
Although GDP recovered the 2019 level in the first quarter, national demand remains 2.5% below the pre-pandemic data.
Fernández focuses on the gradual weakening of the world economy (especially in the euro area), which may impact the contribution of tourism, in addition to the fact that this sector “no longer has room” to make GDP grow much more because it has already exceeded the pre-pandemic level.
economic chiaroscuro
These good macroeconomic figures contrast with the reality of Spanish families, still very affected by the rise in energy and food prices caused by the pandemic and the war in Ukraine. Spain continues to grow, but the crisis has left many chiaroscuros. “The macro data is not disputed by anyone, but that does not mean that in the micro there are people who are having a bad time, especially the lower part of the lowest income” due to having raised food or mortgages, explains the economist José Ignacio Conde-Ruiz, professor of Economic Analysis at the Complutense University and deputy director of Fedea.
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In fact, the IMF warns in its report that the fight against inflation continues, since it has become the Achilles heel of the euro area. The agency notes that prices are “giving way” in most countries, but it continues to be “very high”, especially in the case of food. “In most economies, the priority continues to be achieving sustained disinflation while guaranteeing financial stability,” points out the IMF, which is betting that central banks build fiscal reserves and that governments direct tax cuts to the most vulnerable groups. “Improving the supply side of the economy would facilitate fiscal consolidation and encourage a smoother decline in inflation towards target levels”, which in the case of the EU is 2%.
What’s more, economic growth will cool down in the second part of the year, according to most organizations. This Tuesday the Institute of Economic Studies (IEE) reiterated it, which although it improves its GDP forecast for this year to 2.2%, warns of a “notable slowdown” in activity in the second semester that will lead the country to advance only 1.5% in 2024, an “insufficient” growth rate to reduce the unemployment rate, they point out.
“Probably the upward revision by the IMF is mainly due to the effect on the annual growth rate of the revisions made by the INE to the figures of the last quarters, and not to an improvement in the prospects for the second half of the year”, confirms the Funcas economist.
Moody’s warns of high deficit level
In the IMF report this time it does not give more economic data apart from GDP, but the Moody’s credit agency has presented its deficit and debt projections on Tuesday and corrects the government data. Thus, the institute estimates a deficit of 4% for 2023 and 3.2% for 2024, one and two tenths higher than the figures of the Executive.
Thus, the debt/GDP ratio would stand at 111.9% this year and 110% for next year, also above the Government forecasts for 2024 data. The agency warns in its report that political parties have been “reluctant” to address the challenges of public finances, but reaching the 3% deficit target is a “demanding” aspect for the next Government, given the slowdown in growth and spending commitments .
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