Something is shifting in Spain’s productive pattern. Investment in housing continues to lose weight, and in the last two years it has thinned to 29 percent of the total, far from the 40 percent seen during the property boom. Within non-residential investment, machinery and technology gain ground, while construction retreats to 3.6 percent of this category, well below the 13.1 percent reached at the start of the century.
That is how the BBVA Foundation and the Valencian Institute of Economic Research (Ivie) detect it after updating the dataset “Stock and capital services in Spain, their territorial and sectoral distribution,” with data from 1964 to 2023. “The pattern of capital accumulation in Spain is changing, toward directions that should gradually yield positive effects on productivity, which has been lagging for years due to a scarce productive investment mix,” say the analysts, led by Ivie researchers Francisco Pérez, Matilde Mas, and Juan Fernández de Guevara.
According to the accompanying study, investment in Spain grew by an average real rate of 2.7 percent in 2022 and 2023. Ivie’s estimate for investment progression does not match the INE’s figures, which point to a real drop of 0.5 percent in 2023 for gross formation of capital. In plain terms, Pérez notes, Ivie’s nominal figures (in euros of investment) align with INE’s, but the real rate differs because Ivie adjusts the numbers with a lower inflation rate than the deflator used by INE. Either way, this discrepancy does not change conclusions about how investment is distributed across productive sectors. Both National Accounting data and Ivie series lead to the same takeaway: Spain’s investment effort in 2023 remained below pre-pandemic levels, at about 19.3 percent of GDP, versus over 20 percent in 2019.
Productive pattern
Ivie calculations show that the average 2.7 percent annual growth in investment over the last two years masks declines in capital formation in agriculture (-5.2 percent), energy (-1.5 percent), and construction (-3.7 percent). In contrast, there are gains in manufacturing (3.7 percent) and in both public (2.1 percent) and private services (4.8 percent). The authors summarize that the surge in investment in these branches points to a capital formation shift toward activities that concentrate more on machinery, transport equipment, information technologies (IT), and intangible assets, while less in non-residential construction assets such as infrastructure, warehouses, and premises.
These changes in the investment structure are not new; they began after the housing boom ended and have gradually solidified a capital formation orientation toward more productive activities, according to Ivie’s analysis.
Specifically, rising investment in private services and manufacturing has increased their share within total non-residential investment to nearly 70 percent in recent years, up from 59 percent in 2007. Manufacturing accounts for 17.6 percent, while private services stand at 52.4 percent. By contrast, construction has fallen from 13.1 percent of non-residential investment in 2007 to just 3.6 percent in the last two years.
Public and private investment
In short, the new sectoral composition of investment has boosted technology- and knowledge-intensive assets—machinery, IT, and intangible assets. These shifts have meant that in 2023 more than 36 percent of non-residential capital stock is concentrated in manufacturing (13.7 percent) and advanced services (23.5 percent).
The arrival of Next Generation EU funds is highlighted as one of the drivers that, in recent years, helped revive public investment after the tight adjustments seen after the Great Recession. Ivie data show public investment growing 4 percent in 2022 and 1.9 percent in 2023, compared with 2.5 percent and 2.9 percent for private investment in the same years.