Spain’s GDP soars: Riding the wave of economic growth

Spain’s Gross Domestic Product (GDP), a measure of the value created by goods and services, showed strong growth in the fourth quarter of 2023.

The news comes according to data from the National Statistics Institute (INE).

The economy expanded by 0.6 per cent compared to the previous quarter and by 2.0 per cent compared to the same quarter the previous year, in line with the preliminary report released in January.

Analysts at ING noted that the growth exceeded expectations, with GDP surpassing market forecasts

They highlighted positive signs across various sectors, particularly pointing to the significant increase in household spending.

This rise has been fueled by improved business confidence and higher real purchasing power due to lower inflation compared to wage growth.

Despite challenges like higher interest rates, investment in Spain also grew in the fourth quarter of last year.

Investment in green projects, digitalisation, and the ongoing rollout of EU recovery funds have supported business investment.

Residential investment has seen particularly strong growth due to increased housing demand.

Compared to other European countries like Germany, Spain is performing well, partly because it relies less on manufacturing, which is more vulnerable to global economic slowdowns.

However, Spain’s strong economic growth could lead to inflationary pressures, making it challenging to meet the 2 per cent inflation target this year.

In February, inflation in Spain decreased to 2.8 per cent from 3.4 per cent in January, with the Harmonised Index of Consumer Prices (HICP) also dropping to 2.9 per cent from 3.5 per cent.

This decline was mainly due to lower electricity prices and stabilised food prices, although higher fuel costs pushed up headline inflation slightly.

Core inflation, excluding food and energy, also eased to 3.4 per cent from 3.6 per cent in January, which is seen as positive news for the European Central Bank (ECB).