Spain was the third OECD country where GDP grew the most in 2023

The recently concluded 2023 has been a year of economic joy for Spain. The strong recovery of tourism and contact services were a great driver of growth in an international climate of stagnation and doubts, especially in the eurozone. Spanish GDP exceeded analysts' expectations and closed 2023 with an increase of 2.5%. A figure that in the OECD only Costa Rica (5.1%) and Mexico (3.1%) were able to surpass and that the United States—one of the most dynamic economies in the world at this time—matched.

This is clear from the compilation of GDP data for the fourth quarter that was released this Wednesday by the OECD, an international organization that groups together mostly high-income countries.. The figures provided by the agency are preliminary. At the moment, there is only complete data for 2023 in 17 of the 38 countries in the group. Although Spain will predictably surpass in growth the majority of States for which information is missing, there are countries such as Poland, Croatia or Brazil that could surpass the Spanish annual record when they report their GDP data for the fourth quarter.

What is already known with certainty is that Spain was able to grow above the average of the large economic regions of the world.. The Spanish GDP in 2023 exceeded the OECD average by nine tenths (1.6%), that of the G7 (1.7%) and quintupled the records of the eurozone and the European Union (0.5%).

Among the reasons that explain why Spain has managed to come out better than the rest of the large advanced economies, the sectoral composition of the Spanish productive fabric stands out.. 2023 was the year of the recovery of international tourism and the Spanish economy – where this sector contributes around 10% of GDP and employment – particularly noticed it. Spain was able to avoid the stagnation suffered by its European partners also thanks to the lower weight of the industry in the economy, the lower energy dependence on Russia and also the lower importance of China for its exports.

The short and medium term outlook is also favorable.. The main analysis organizations agree on placing Spain as the large European economy that will grow the most in the next two years. The European Commission is betting that Spain will grow by 1.7% in 2024 and 2% in 2025, above Germany, France and Italy in that period of time.

However, not all that is gold shines. Despite the good prospects in the short and medium term, the Spanish economy has a significant productivity problem. The capacity to generate growth per inhabitant and per hour worked is the same as ten years ago. Activity continues to concentrate in sectors with little added value for the economy, such as tourism.. Without a productive revolution, economists agree, it will be difficult to overcome the job and salary insecurity suffered by a large part of the country's population, especially young people.

European funds will boost GDP by 3.5%

The future of the Spanish economy in the medium term is conditioned, in large part, by the execution of the European recovery funds. The Next Generation EU program is halfway through and the European Commission has taken the opportunity to publish an evaluation of how the mechanism is working so far.

One of the most striking conclusions of the report, which was published this Wednesday, is that Brussels calculates that European funds will boost Spanish GDP by up to 3.5%. That is to say, at the end of the program, Spain will have recorded an increase in growth of that percentage that would not have been achieved without the Next Generation. Furthermore, it must be taken into account that the reforms linked to the receipt of funds should also have a boosting effect on the economy, which the EU does not quantify in its model.

This boost is one of the largest among all EU countries, in fact it very clearly exceeds the average expected for the club of 1.4%. Much of this difference is explained because Spain is one of the largest recipients of funds in relation to its size.. The allocation of funds took into account the disaster that European economies suffered in 2020 and that of Spain was the largest in the entire union.

Regarding the development of reforms, Spain is the second most advanced country in the EU. Only Italy, which has already completed 178 milestones and objectives (a third of the total), surpasses Spain, which has completed 121 (29% of those planned). The European Commission highlights in its report the reforms in the labor market, with special mention to the labor reform that, in the words of the Brussels technicians, “generalized the use of indefinite contracts and encouraged the internal flexibility of companies, achieving a long-awaited balance between worker protection and flexibility.