The Savings Bank Foundation (Funcas) has joined the list of organizations and institutions that are revising upwards their forecast for the growth of the Spanish economy this year. It has raised it by three tenths, reaching 1.8%, a boost that would continue next year, with an increase in GDP of 2%. This is the good part of the forecasts, the not so optimistic part focuses on the warning of lack of investment, which last year remained 3.5% below the pre-pandemic level, and which continues to be the pending issue of the economy Spanish.
If 2023 closed with a surprising 2.5%, it was largely due to two factors, public spending and exports. Neither of the two will occur in the same proportion this year, which helps explain the lower GDP increase that is calculated. As far as public spending is concerned, with the entry into force of European fiscal rules, it is time to slow down, and exports will be affected by the minimal growth in the euro zone, the main destination for the outflow of Spanish products and goods.
The boost this year comes from private consumption, which also played a role last year, but will be more significant in 2024, with 1.8 points of contribution to GDP. Households can continue consuming largely thanks to job creation, which remains very positive, already close to 21 million members, and because they can disburse part of the accumulated savings in 2023.
In any case, it is worth pointing out a clarification regarding private consumption. It will be the engine of the economy this year, and it has already reached the pre-pandemic level, but it has been achieved basically due to population growth. More population, more consumption. Because when real consumption per capita is analyzed, it is still 2% lower than at the end of 2019, and if we look at real consumption per household, it is even further away, 3.4% less.
The most worrying problem of the Spanish economy is the lack of investment. Other organizations have pointed this out and Funcas also highlights it. “One of the points that worries us most is the weak evolution of investment,” said the general director of Funcas, in the presentation of these economic forecasts. This year, gross fixed capital formation will increase by only 1.1%, a level only very slightly above that of 2023.
The truth is that this lack of investment will be more noticeable from now on when public spending will have to be reduced. A more restrictive fiscal policy is underway, aid against inflation must also be withdrawn, and the extension of budgets is added which, in some cases, will prevent planned expenses from being carried out. All of this poses a threat. “There is a risk that the volume of investment will not be sufficient to maintain the capital stock, which would constrain the economy's long-term growth capacity… in this sense it is of crucial importance to improve the execution of European funds,” added Raymond Torres, director of Funcas' Situation. Some funds that have a hard time reaching the real economy. “More comes to large companies and the weakness of investment is in the smaller ones,” added Torres.
Regarding the public accounts, Funcas warns that the lower growth will make their correction difficult, although with the deactivation of the anti-inflation measures and the freezing of part of the spending due to the budget extension it can reduce the deficit this year to 3.2% and the debt to 106.2%.
