Spain | The economy shifts gears

Summary

The Spanish economy is entering a new phase of expansion in which the drivers of recent growth are running out of steam. Replacing these with new ones will bring a sense of having already crossed this bridge. But neither the Spanish economy nor the bridge are the same as before.

Key points

• Key points:
• The engines of growth are changing. Government expenditure and foreign tourism drove recovery, exceeding pre-pandemic levels by 18% and 43% respectively; current GDP exceeds 4Q19 by 8.8%.
• However, Government expenditure has experienced three quarters of weak or negative growth. At the same time, the contribution of the tourism sector to GDP growth is weakening.
• Despite this, GDP in the second quarter reflects economic growth of between 2.5% and 3%. This is now supported more by domestic consumption (up 3.5% year-on-year) and investment (up 5.3% year-on-year).
• Given that domestic consumption has lagged behind other variables (it is barely 5% above pre-pandemic levels) and its impact on the well-being of families, this is a welcome development.
• It is worth asking what some of the defining features of this new growth model, driven by domestic demand, might be.

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