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Spain’s explosive growth isn’t losing steam, economy minister says

Spain’s recipe for rapid economic expansion continues to work, said Economy Minister Carlos Cuerpo in an interview with POLITICO. 
The country has been among the fastest-growing economies in the eurozone since the pandemic, helped by the boom in ‘revenge’ tourism since 2021 as travelers sought to make up for time lost during lockdowns. The economy ministry recently revised its forecast for GDP growth in 2024 to 2.7 percent, up from 2.4 percent previously. It sees further 2.4 percent growth next year and 2.2 percent in 2026. 
“What we see today is that growth, or the growth pattern, is more balanced than ever in our recent history,” the Spanish minister said. 
All of this contrasts starkly with Germany, which used to be the eurozone’s economic anchor but has hardly grown since the pandemic. Berlin is facing a second straight year of contraction in 2024.
Spain, like its peers in Southern Europe, limped out of the euro crisis with high debt and unemployment and low growth. Germany, by contrast, powered ahead thanks to its strength in manufacturing capital goods, thanks not least to an investment boom in China.
But a combination of high energy prices and increasingly direct competition from China in high-value areas have hurt Germany’s industrial sector. The country’s liberal finance minister, Christian Lindner, has put on a brave face and insisted its business model “is not broken.”
“Quite amazing that Spain has grown as much as Germany since 2008 despite the euro crisis,” said Angel Ubide, managing director at hedge fund Citadel LLC via X. “The closing of the GDP gap since 2020 has been extraordinary, supported by well-designed Spanish economic policies.” 
Tourism in Spain set a record in 2023, with arrivals surpassing 85 million for the first time. Madrid is set to break that mark in 2024, with summer arrivals up 7 percent year-on-year. The crowds have brought plenty of cash to the Spanish economy — the country’s statistics agency estimates over €15 billion in August alone — but that has come at a political cost. Scenes of local residents, sick of high prices and unaffordable rents, soaking visitors with water guns have gone viral. In drought-stricken regions like Catalonia, meanwhile, authorities have had to ration water as record arrivals have strained finite resources.   
Cuerpo noted various mitigating factors, including the fact that tourist arrivals are growing fastest outside the peak months of July and August. The geographic distribution is also becoming more balanced, he said, with visitors increasingly heading to Northern Spain instead of just the south coast. 
But it’s not just a tourism story, he added. 
“You have to look at non-tourism services” the minister said, such as consulting and finance. “Their exports are actually bigger than tourism. So we have around €100 billion in terms of non-tourism exports, while we have €90 billion in terms of tourism exports.”
That strength is visible throughout the economy. Spain’s balance of payments is positive and growing after decades in negative territory, while unemployment, although still above pre-financial crisis levels, is trending down.
Spain admittedly has work to do: Investment is still not back at pre-pandemic levels, while a recent pension reform failed to address looming liabilities as the baby-boomer generation retires. The country’s debt-to-GDP ratio is also close to 110 percent — the fourth highest in the EU; meanwhile, Madrid dodged an excessive deficit procedure, the special Brussels surveillance regime for budget sinners, by the skin of its teeth, but still runs a deficit around the 3-percent-of-GDP limit.  
The government has said it wants to bring the deficit down to 2.5 percent of GDP next year, followed by 2.2 percent in 2026.  Cuerpo, who previously served in the Independent Authority for Fiscal Responsibility, says he’s committed to debt reduction. 
“There’s a clear element of fiscal responsibility in our actions,” said the minister, flagging how financial markets are treating Spanish government debt.
Yields on Spanish 10-year treasuries are now below those of their French counterparts, a measure of how investors see financial risk in the two countries. However, they are also above those of Portugal, whose fiscal consolidation has been the more convincing since the two were bailed out a decade ago.
It’s a sure sign the markets may have forgiven its moment of weakness in 2012, but haven’t forgotten it.

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