Francisco Vidal | Convergence with the main European nations in terms of levels of welfare and wealth has been one of Spain’s major objectives for longer than we would have liked, and the situation, far from improving, has worsened in recent times. In the year 2000, Spain’s real GDP per capita was equivalent to 95.6% of that of the current 27 EU countries as a whole; a figure that fell to 86% in 2022 according to this indicator, which allows us to abstract from the distortions generated by inflation.
We then have a long way to go to achieve convergence, even if we compare ourselves with the EU as a whole, and not just with the eurozone, in order to carry out an exercise that might come closer to certain Spanish realities. In practice, when it comes to closing any welfare and wealth gap, the best mechanism is to achieve solid and dynamic growth in the long term, and this necessarily involves boosting productivity. A boost in productivity that also brings more and better jobs that allow the increase in wealth to filter through to society as a whole.
In contrast to the previous approach, in Spain we are witnessing an increase in growth that is based more on short-term dynamics than on a long-term vision. Specifically, the boost in public spending is doping activity on the basis of weak foundations, as we are witnessing the risk of increasing structural spending in a context in which the suspension of European fiscal rules will come to an end in 2024, while the stimulus from the Recovery Plan will not last forever and its long-term impact has yet to be clarified. All this while the stability of our public debt continues to depend on the ECB, whose portfolio of Spanish debt totals close to €500 billion (equivalent to almost 36% of outstanding Treasury debt).
Overall, there are reasons to doubt the sustainability of the current dynamics of public spending, which has been one of the main drivers of growth in recent times. In the third quarter of 2023 and according to national accounting data, this expenditure was slightly more than 10% higher than in the same period of 2019, but also for the whole of that year. It is an increase that comfortably exceeds the advance of only 2.5% recorded by GDP with respect to its average values for 2019, despite also counting on the support of external demand that has helped to hide the poor performance of investment. Specifically, gross fixed capital formation was 2.5% below its average figures in 2019; a negative gap that reaches -6.8% when it comes specifically to machinery and capital goods.
In Spain, investment is not responding and, moreover, if we are guided by the consensus forecasts of the November Funcas panel, it is expected to fall slightly in 2023 as a whole in a critical area such as machinery and capital goods. After significant year-on-year falls in this item for four consecutive quarters, this forecast does not come as a surprise, but it does reaffirm the worrying nature of the investment situation.
In 2022, investment in fixed capital was equivalent to 20% of Spanish GDP; a figure that worsened to 19.4% in the third quarter of 2023 and which contrasts with values close to 22.5% in the EU as a whole. Thus, our deficit continues to worsen in a strategic area, just at a time when the situation should be the opposite in the shadow of the revival of European funds.
