Investment in Spain and the EU

With a similar starting level two decades ago, Gross Fixed Capital Formation per working-age adult in Spain stood at 2,217 euros in 3Q23, 5.3% less than in 2001, while in the EU27 it reached 3,282 euros, 35.6% more than in 2001 and 48.0% more than in Spain.

Key points

• Key points:
• This poor relative performance of investment per working-age adult for more than a decade is undoubtedly one factor that explains why Spain's relative per capita income has fallen from 105.2% of the EU average in 2006 to 86.7% in 2023, as well as labor productivity.
• Among the different explanatory factors for this poor relative investment performance in Spain are mainly the increase in public spending and fiscal pressure, as well as the relative deterioration of the institutional quality of the public sector shown by World Bank indicators.
• Other explanatory factors (deleveraging, financing restrictions, COVID crisis, bottlenecks and disruptions in global production chains, or disturbances in energy markets) may have been important at different times, but do not seem capable of explaining a relative deterioration of the investment that has already lasted 15 years, given its transitory nature.
• Excluding investment in housing, we find that the relative performance of the rest of Spain's investment per working-age adult with respect to the EU has been similar to that of total investment.
• Spain needs a medium and long-term strategy to foster investment, improve opportunities for the creation and growth of companies, and attract the productive physical, human, and technological capital needed to face the energy and digital transition and to resume the path of convergence in terms of employment, productivity, per capita income and welfare with EU countries.

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