Private consumption will become the main support of the Spanish economy next year and is what will allow it to maintain growth of 1.4%. After 2023 that ended on a weak note, 2024 will also start weak, but going from less to more, according to the monthly report from CaixaBank Research published yesterday.
In this way, consumption, which has become the mainstay of the economy during the second part of this year, remains a white hope to save growth in 2024 that, in any case, will be much lower than this year. One point less according to these calculations, although it will continue to be well ahead of the eurozone, which in 2024 would remain at 0.7%.
“This growth of 1.4% will be enough to continue creating jobs and the decline in inflation should lay the foundations for a sustainable and gradual improvement in the purchasing power of families,” says Enric Fernandez, chief economist at CaixaBank Research.
This strength of private consumption is explained because the financial position of families is less stressed than a few months ago, with gross income that experienced a historic growth rate in the second quarter of this year, while the savings rate stood at above 10% of household income. These are data that guarantee a good cushion for households to maintain their consumption in the coming quarters and in this way boost the economy. An increase in salaries in recent months clearly higher than inflation plays in the cushion's favor.
Without external disturbances, Spanish GDP would increase by 2.5% in 2024, thanks largely to the support of European funds. But here the high interest rates especially take their toll, in addition to the still high inflation, accentuated by the withdrawal of fiscal measures; and also the fall in external demand. One point less GDP in total. Regarding interest rates, CaixaBank Research predicts that they will maintain their current level until mid-2024.
On the other hand, in 2024 inflation will continue to hinder the evolution of activity, although less than in the last two years. The positive part is that the underlying rate should moderate throughout 2024, while the general rate would remain practically at the same level, 3.7%.
Meanwhile, the productivity of the Spanish economy has not taken off and far from closing the gap with the locomotive of Europe (Germany), it has widened in the last decade. In the same CaixaBank Research report, the bank's researchers recall that between 2010 and 2019, productivity in Spain increased by 9.3% and in Germany, by 16.7%. Productivity in Spain, which in 2010 was 23.4% lower than that of Germany, is now 28.2%.
The main reasons for this deterioration – according to the report – are the sectoral division and the small size of the companies. In Spain, all sectors have gained productivity in the period analyzed, but those where it is lower, "such as hospitality or administrative activities, have gained weight in total employment." The labor market has grown thanks to these activities. But this growth in employment is greater than production.
The other big problem is the small size of the companies. Three out of every 10 employees work in a micro-business (less than 9 workers), while in Germany they represent less than 19%. Just the opposite of what happens in large corporations (more than 250 workers): in Germany 42% of workers are in this type of company compared to 32% in Spain.
CaixaBank Research estimates that if the market had the specialization by activity sectors and size of Germany, productivity could jump by almost 30%. “In this way the productivity differential would be reduced to 7.7%,” compared to the aforementioned gap of 28.2%.
