Spain has not only left Germany and France behind in economic growth, but is also at the top within the major European economies with a growth of 2.5%. That makes Spain the economic success story of the EU.
Only tiny Malta recorded even higher growth within the EU last year. This success story also promises robust growth for the current year.
Late recovery, strong growth
“The Spanish economy recovered significantly later from the Covid crisis and was among the European laggards. Now she is growing all the stronger. ” This is what Omar Rachedi, economist at the ESADE Business School in Madrid, said in the newspaper El Economista. In early 2023, Spain, the EU’s fourth largest economy, returned to pre-pandemic GDP levels. The country then surprised both the EU and the International Monetary Fund IMF, with almost all analysts revising their figures upwards.
Good fourth quarter
The fourth quarter of last year in particular contributed to this growth, with an economic increase of 0.6% compared to the previous quarter. In addition, 800,000 new jobs were created last year, mostly in the tourism sector, which has had a record year.
Banks and political stability
Spanish banks, with Santander as the country’s largest financial institution, have also posted record profits in 2023. The Spanish economy does not appear to be suffering from the ongoing political crisis, following early parliamentary elections in July and the formation of a new left-wing minority government in November .
Benefit from the EU Recovery Fund
Spain has benefited significantly from the EU’s Covid recovery fund, more than any other EU member state except Italy. “Spain has received the second largest sum after Italy. Despite this, the country was much better able to utilize the resources than Italy,” says Rachedi. A total of €164 billion has been made available from the Next Generation program, of which €77 billion in subsidies. This has led to an 11% increase in government spending compared to the pre-pandemic period.
Less dependent on Russian gas
Another advantage for Spain is the reduced dependence on Russian natural gas compared to countries such as Germany. The recession in Germany has hit Spain less hard than Italy, which has suffered comparably badly from Covid. The economy in Italy is growing less rapidly. The decreased exports to Germany play a greater role there than in Spain. France is Spain’s most important trading partner within the EU, followed by Portugal.
Competitiveness of Spain
Spanish exports, which have increased by seven percent since 2019, are further contributing to GDP growth. “Much of the momentum is due to Spain’s competitiveness, which has been fostered by price restraint,” Rachedi notes. Relatively low inflation has helped control prices and wages, further supporting economic growth.
Also read: Spanish economy fastest growing withing EU
