Spain | A pending economic transformation

Summary

So far, the impact of the Next Generation EU funds on investment and productivity has been less than expected. However, with a broad consensus and structural reforms, Spain should be able to realize its potential and consolidate more solid, sustainable, and productive growth.

Key points

• Key points:
• Although the NGEU funds have boosted the Spanish GDP, their estimated contribution to growth has been between 1.2 and 1.7%, far from the expected impact of 2 to 3 additional points. The slow absorption of resources has delayed its effect on potential growth.
• Public investment has increased but has not managed to sufficiently pull private investment along with it. It was hoped that every 1.4 euros of public money would mobilize five euros of private money, but the real effect has been considerably less, making it difficult to recover the levels of 2019.
• The productivity of the Spanish economy has hardly improved, as the employment generated in recent years has been concentrated in sectors with lower added value. GDP per employed person has only grown by two-tenths of a percent since before the pandemic.
• The execution of funds has been slower than expected, and the modernization of the public administration has not advanced sufficiently. The persistence of bureaucratic barriers and ineffective regulations has slowed down the development of strategic projects.
• To take full advantage of the opportunities of the dual digital and ecological transition, Spain needs a broad consensus that will enable it to improve the efficiency of spending, attract private investment, and strengthen the economic environment through structural reforms.

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