Spain’s economy shows resilience with growth expectations edging up for the second half of the year, supported by consumer demand in families and households. Analysts project a yearly expansion between 1.9% and 2.1, based on findings from the Esade Economic and Financial Report for the second half of the year, prepared by EsadecPol.
The Bank of Spain, like other research bodies, recently raised its 2023 growth forecast to 2.3%, seven-tenths higher than its March projection and exceeding the government’s 2.1% estimate.
Esade’s real-time indicators suggest a 0.6% expansion in the second half, mirroring the first half, as reported by Manuel Hidalgo, who led the analysis team.
Activity remains volatile, with May showing gains and June posting softer-than-expected results. The forecast range sits at 1.9% to 2.1% as of now, though there were moments when growth approached 2.2% amid a recent slowdown and, on occasion, 2.3% according to Hidalgo.
Investment and exports, after bouncing back from pandemic shocks, now serve as key drivers of Spain’s growth. The impact of the war in Ukraine and accompanying inflation has influenced these engines, noted by Antonio Assad EcPol’s management team.
From an international angle, the United States could enter a slowdown in the second half of the year, while euro-area growth underperforms, hovering below 1%, according to Josep Comajuncosa, an EcPol professor.
security vulnerabilities
Despite a healthy growth rate, the Spanish economy faces notable vulnerabilities. High indebtedness and modest efficiency improvements are referenced, with GDP per capita roughly at the 2005 level in some estimates. Roldán and colleagues emphasize that reforms remain essential, signaling a long path ahead.
Inflation continues to erode purchasing power, while rising interest rates weigh on growth globally. Comajuncosa notes that an initial strong start to the year cooled in the second quarter, partly due to weak loan demand and other factors, followed by price increases that dampened consumption.
lower consumption
On a national scale, household consumption has contracted as inflation bites and wages struggle to keep pace with rising prices. At the same time, loan demand has cooled, restraining overall growth. Yet pockets of strength persist, such as vehicle purchases and durable goods, buoyed by a robust labor market.
Hidalgo warns of a potential risk in the latter part of the year: a slowdown in the services sector. Real-time economic monitoring shows a broad pattern of subdued activity, with the exception of a positive industrial production index in May.
In recent weeks, signs of cooling in trade and consumption have appeared. Demand for new credit remains weaker than depreciation, particularly in housing, while consumer credit also declines. All these signals point toward a softer growth trajectory, even as some segments perform better than others.