According to new Eurostat data, Spain's economy grew by 3.4% year-on-year in the July-September period.
This value is higher than the growth rates observed in other countries, with the average value for the Eurozone being 0.9%, Euronews reported.
One of the reasons for the sharp increase in GDP is that Spain was disproportionately affected by the pandemic. Partly because of the country's reliance on tourism, the Spanish economy took longer to recover from the shock.
Therefore, when thinking about why Spain is ahead of its competitors, it is important to remember this base effect. Recovery often looks dramatic when compared to an unusually low starting point.
Even so, Spain is now on a faster growth trajectory than the 2013-2019 average.
Tourism
According to the latest data from the Spanish National Institute of Statistics, in September of this year, the country welcomed 9.6 million foreign tourists. This is an increase of 9.1% compared to the same period of the previous year.
At the same time, when looking at foreign visitor spending, it rose to 12.62 million, a 12.7% year-on-year jump.
"While tourism is expected to remain strong, the pace of growth may slow as the initial wave of post-pandemic travel subsides," said Professor Reuben DeWitt, an economist at ING.
"This growth is unlikely to continue at the same pace, and tensions with the local population are already there," he added.
Spain has seen several protests against mass tourism as residents express anger at rising rents, insecure jobs and other negative effects of the industry.
Miguel Cardoso-Lecourtois, chief economist at BBVA Research, said he also expected a "slowdown" in Spanish growth.
"The contribution of external demand should turn negative next year due to constraints in the expansion of tourism services exports and the transition to a growth model with higher spending on imported goods," he explained.
Cardoso-Lecourtois added that, in the long run, Spanish exports may not benefit as much from the expected recovery in the eurozone.
He blamed for this the difficulties in the country, which affect areas such as the automotive, pharmaceutical or tailoring sectors.
"They may suffer from regulatory uncertainty, the effects of high growth during the pandemic and changes in preferences," the expert explained.
Fluctuations in demand can have a negative impact on a sector, as they can lead to oversupply or capacity shortages, as well as a sharp rise in labor costs.
Immigration
Spain's strong exports, as well as stable consumption, are only possible thanks to the state of the country's labor market.
In the third quarter of this year, the country's unemployment rate fell to 11.21%, its lowest level since the 2008 financial crisis.
The supply of free workers, mainly thanks to immigration, allowed Spanish businesses to increase their production without overburdening their budgets.
"The foreign-born active population grew by 9.1% year-on-year in the last quarter, compared to a growth of 0.6% for the native population," said Professor Reuben DeWitt.
"While this may support economic expansion, the stagnation in productivity of one full-time equivalent job also highlights the need for policies to ensure that these workers are integrated into the economy productively to further stimulate economic growth DeWitt added.
Angel Talavera, head of European economics at Oxford Economics, also said that while the "migration surge" had contributed to Spain's growth, a distinction should be made between nominal GDP and GDP per capita.
As Spain's population grew, the average economic product per person did not increase as dramatically as the national product.
"Hispanics have seen much less improvement than in the aggregate figures, which helps explain why there is still some discontent despite the good economic performance," Talavera said.
Public expenditure
Public investment is also one of the factors behind Spain's recent growth trends.
The country will receive 163 billion euros under the European Union's "Next Generation EU" fund, created to support countries recovering from the pandemic.
By the end of October, Spain had received 48.3 billion euros of this amount.
"The long-term impact of Next Generation EU funding will depend on its ability to stimulate long-term investment and productivity growth, and hence the strength of its multiplier," said Professor Reuben DeWitt.
Looking ahead, Juan Carlos Martínez Lázaro, professor of economics at IE University, said that "consumption in Spain should remain stable", "especially now that inflation is already below 2%".
"The ECB's change in monetary policy will stimulate consumption and hopefully investment," he explained, highlighting private investment as an area for improvement. | BGNES
