Following the latest and controversial revisions by the National Statistics Institute (INE), Spain’s GDP exceeds the pre-COVID level by 5.7%, compared to 4.2% in the eurozone, thanks to public consumption, as household spending and investment are “lagging”, as the Bank of Spain points out.
However, not everything is bright in the progress of the Spanish economy. On one hand, it has lost competitiveness compared to the eurozone as a whole due to unit labour costs, which in Spain have risen by 21.5% in the post-pandemic period, 1.7 points more than initially estimated because “wages have been revised upwards more intensively than productivity.” Meanwhile, in the eurozone average, labour costs have grown by 18.3%, 3.2 points less than in Spain. This is a point to consider when the government intends to reduce working hours and raise the minimum wage again.
According to the Bank of Spain, a significant part of the growth between 2019 and 2024 is due to “a dynamism in public consumption and investment that is higher than previously reported,” which has compensated for a negative contribution from external demand and private consumption and investment that continue “on a more lagging recovery path.” So, while public consumption has surged by 16.8% between the fourth quarter of 2019 and the second quarter of 2024, private spending has barely grown by 1.4% and investment by 0.4%.
Overall, Spain’s GDP per capita continues to grow less than that of its neighbours. It grew by 2.5% between the end of 2019 and the beginning of 2024, compared to an average of 2.7% in the eurozone and far behind Italy’s 6.8%, Portugal’s 3.9%, or Greece’s 10.9%.
Bank of Spain warns: Spain growing due to public spending but losing competitiveness with eurozone due to labour costs
Bank of Spain
