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People shopping on the streets of Madrid. O. Chamorro
Spanish economy starts the year strong recording GDP growth of 0.7%
Finance

Spanish economy starts the year strong recording GDP growth of 0.7%

Household consumption and tourism contributed to the growth registered during the first part of this year

Edurne Martínez

Madrid

Tuesday, 30 April 2024, 14:14

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The Spanish economy grew by 0.7% in the first quarter of the year, positively surprising analysts who predicted growth of between 0.4% and 0.6%.

Data released this Tuesday 30 April by Spain's INE national statistics institute showed household consumption and tourism were - once again - the levers contributing to the growth of Gross Domestic Product (GDP) during the first part of this year.

Growth of 0.7% from January to March equals the good closing of the fourth quarter of 2023 (which the INE has revised upwards by one tenth of a percentage point), ensuring GDP growth of 2.5% last year, even above the government's forecasts, but also a few tenths above the forecasts of the Bank of Spain, the OECD and the European Commission. This comes despite 2023 not being an easy year due to high inflation and rising interest rates.

The INE data shows the year-on-year GDP grew by 2.4% in the first quarter, the highest rate in the past year. The strong results "puts us in an optimal position to meet the government's growth target for 2024, which stands at 2%", said minister of economy Carlos Cuerpo.

Analysts have now been updating their forecasts for 2024 given the monthly data. This is the case of the International Monetary Fund (IMF), which in its report two weeks ago improved its projections for Spain to GDP growth of 1.9% this year. And yet the agency once again cut its growth forecasts for all the major powers because of the wave of international conflicts, which are taking their toll on the Eurozone. For Germany, it predicts very weak growth this year of 0.2% and for France 0.7%.

The key to the foreign sector

Minister Cuerpo pointed out the INE data for the first quarter confirms Spain's "differential" growth with respect to the main economies of the Eurozone, "something that is especially relevant in the international environment of high uncertainty that we are experiencing".

The main reason for the quarter-on-quarter GDP growth was the foreign sector, which accounted for five of the seven tenths of a percentage point, mainly due to tourism. Household consumption grew by 0.3%, the same as in the previous quarter. Meanwhile, investment rebounded by 2.6% from January to March after two negative quarters. For the annual rate, national demand contributed 2.2 points to growth, while foreign demand contributed two tenths of a point.

The INE data also revealed the number of hours worked increased by 1.3% in the first quarter, one point less than the previous quarter. Full-time jobs rose by 3.4%, five tenths of a percentage point less than in the previous quarter. Productivity per full-time job recorded a rate of -0.9%.

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