Published on Tuesday, October 17, 2023

Spain | Oxymoron: stagnant growth

The Spanish economy presents a strange case in which growth and stagnation coexist. This is due to the divergence in the trends shown by services on the one hand, and industry, agriculture and residential construction on the other.

Key points

  • Key points:
  • In a couple of weeks, the Spanish National Statistics Institute (INE) will release the preliminary GDP estimate for the third quarter of the year. Analysts' consensus seems to agree that the increase will be lower than in the second quarter (0.5% quarter-on-quarter, BBVA Research: 0.2%).
  • Some of the weakening may be temporary. In particular, the moderation in job creation is mainly in public administrations and the hospitality industry. These sectors accounted for more than 30% of the growth in Social Security affiliation in January-May, when it added around 75,000 monthly affiliates on average (seasonally adjusted).
  • The electoral cycle likely led to early hiring at the beginning of the year, while the changes in regional governments, the early general elections and the current political interim situation would have led to a moderation in public spending.
  • However, perhaps the greatest source of weakness right now comes from structural factors, which are unlikely to be reversed in the short term and which mainly affect industry.
  • Industry's recovery will depend on the success of investment in new energy sources, the strategy adopted to transform the automotive sector, and the effective use of NGEU funds. For services, it is key for immigration to continue and that it be complementary to the human capital already residing in Spain, so that both jobs and salaries increase.

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