Spain consolidates a balanced and sustainable growth

Just two years ago, many predicted that Spain would find it difficult to escape a slowdown or even a recession. While we were still recovering from the consequences of the pandemic, the war in Ukraine and disruptions in global value chains led to an inflationary spike unseen in decades, prompting central banks to respond with decisive interest rate hikes. Historically, the Spanish economy has been particularly sensitive to international crises and has tended to amplify their cycles. Based on this, and given the impact feared from the dual crisis with which the 2020s began, a pessimistic narrative about the prospects of our country was being generated. However, this time has been different. The Spanish economy has weathered these shocks, growing at rates much higher than those of the major European economies, fueled by strong job creation. Despite being one of the economies most affected by COVID-19, Spain has already recovered to the level of the eurozone. In 2023, we grew more than 5 times above our partners and nearly 4 out of every 10 jobs created on the continent were in Spain. Not only have we managed to avoid the worst-case scenarios some predicted, but we have completely transformed future prospects. Looking ahead, both the European Commission and the International Monetary Fund expect Spain to continue leading growth among the major European economies. Both institutions, along with the Bank of Spain and AIReF, have revised upwards their growth forecasts for our country, which will also be reflected in the government's next macroeconomic outlook, placing growth for 2024 closer to 2.5% than the current 2%. Our new growth pattern is balanced and, therefore, more sustainable. For the first time in our recent history, the Spanish economy is growing and modernizing without accumulating macroeconomic imbalances, with a surplus in its trade balance, sustained reductions in its public deficit and debt as a percentage of GDP, and a gradual moderation of inflation. Significantly, this growth is being achieved while pursuing three major objectives: combating inequality, decarbonizing our economy, and ensuring the sustainability of public finances. In recent years, undeniable efforts have been made towards a more balanced distribution of growth. Among other measures, the minimum wage has been increased, the minimum income scheme has been created to ensure that no one is exposed to the worst consequences of poverty, and measures to combat inflation that specifically address the most vulnerable incomes have been designed. Additionally, steps have been taken to improve the functioning of our labor market, resulting in more and better employment opportunities. Behind these measures lies a concern for equity, but also for social sustainability. The financial crisis taught us that neglecting this dimension leads to social imbalances that eventually erupt in the form of disenchantment with institutions and the emergence of populist movements. Regarding the second objective, Spain has positioned itself as a leader in promoting environmental policies and the decarbonization of the economy, increasingly incorporating renewable energy sources into our production model. These policies aim to safeguard our natural resources while offering an immediate dividend in the form of energy independence. In the current debate on economic security, this factor is crucial in reducing our external vulnerability, as seen in the recent crisis, providing our companies with a competitive advantage, and enhancing the attractiveness of our country for foreign investment. These objectives have been accompanied by a firm commitment to fiscal responsibility. Spain has systematically reduced its public deficit in recent years, outperforming commitments and moving from a deficit above 10% in 2020 to a forecast of 3% for this year according to the European Commission, also reducing the public debt/GDP ratio by more than 20 percentage points from the peak reached in early 2021. This has been done in a manner compatible with significant investments and the strengthening of public services, demonstrating that the level of expenditure is not the only important factor, but also its return in terms of economic growth in the medium term. This philosophy is precisely what the new European fiscal rules, coming into effect this year, advocate. Thus, social, environmental, and fiscal sustainability are not opposing elements but essential ingredients for Spain's recipe for balanced growth. None of this would have been possible without a successful European response. The NextGenerationEU funds are a prime example, crucial for a greener, more digital, and more resilient recovery in Europe. Beyond the unprecedented volume of funding, a novel approach stands out, with a much closer relationship between these funds and the European Commission and a positive incentive (money for reforms), which have made states feel involved in reforms and significantly increased effectiveness. Last week, the Commission once again confirmed Spain's fulfillment of commitments under the Recovery Plan, which will soon enable the disbursement of around €10 billion. This consolidates our position among the leading countries in the EU in terms of ambition and performance in the reform agenda. Additionally, the European Commission recently issued a positive assessment of our economic and fiscal situation, confirming the balanced nature of the growth model (allowing Spain to exit the group of countries with macroeconomic imbalances for the first time since 2012) and compliance with fiscal commitments (resulting in Spain not being part of the countries to undergo an Excessive Deficit Procedure this year). This successful trajectory serves as a powerful ally, bringing us closer to our goals and strengthening our credibility with markets and other countries and international institutions, where we have bolstered our voice. However, there is still a journey ahead. If I were to identify the three major challenges facing our economy today, I would say they are achieving full employment, addressing the housing access issue, and improving the productivity of our companies. These are ambitious goals but are closely related, so progress in each of them brings us closer to success in the others. It is essential to maintain effort, ambition, and commitment to our roadmap of reforms and investments outlined in the Recovery Plan to tackle the major pending challenges. We have an unparalleled opportunity to consolidate our model of balanced, fair, and sustainable growth.