Record rates of inflation growth will continue to undermine the purchasing power and reduce the savings of citizens of the European Union in 2023. The EU is also predicting a reduction in economic growth, but Spain will show relatively better results than the eurozone average, thanks to the growth of its services, tourism and real estate sectors.
According to the Bank of Spain, already in the third quarter of 2022, the country's public debt has already reached 116% of its GDP. And this is without taking into account the recent package of 10 billion euros, which indicates the growing costs of supporting the economy by the government of the country. The expected development of events, given the upcoming elections and the desire of the current leadership to solve the emerging problems in the economy in the near future. However, the ECB's activity to increase interest rates does not play into the hands of this situation.
Currently, the yield on Spanish government bonds is about 3.4%, while at the beginning of 2021 it fluctuated almost at zero. However, the economic situation and its development in the coming years will definitely force the country to return to a more stringent budget policy.
Real estate price growth will slow down significantly
High inflation and a sharp rise in mortgage rates determined the development of the housing market in 2022, although not to the extent that many analysts expected and feared. Last year, housing prices continued to grow actively, although the peak has already been passed. So, in the third quarter of last year, price growth has already slowed down to 7.6%. In the second quarter, it reached 8%. The fourth quarter probably slowed down even more. In general, the increase in prices for residential real estate in Spain in 2022 amounted to about 7.8%. In 2023, some analysts predict a reduction of almost 1%.
The Spanish labor market is expected to weaken
The sharp drop in energy prices in recent weeks, as well as a slight slowdown in inflation, have caused cautious optimism among businesses in Spain, especially in terms of hiring opportunities for new labor. Optimism is associated with the fact that the changed situation may, in theory, lead to some recovery in national demand, which will give companies new ground for growth. However, these are issues of the future, and at the moment the Spanish labor market is in a difficult position. By the end of 2023, it is forecast to weaken and increase unemployment to 13.1%.
Spain's tourism sector will attract 12% more foreign tourists
Back in April 2022, domestic tourism in Spain exceeded the pre-pandemic level and continues to grow. International tourism is also growing, but with a slight lag. From January to November 2022, Spain received about 67.4 million foreign tourists, which is a 139% increase to the final results of 2021, although still 15% less than the results of 2019. The growth of international tourists has a positive effect on the local economy. And the real estate market is already largely stable only thanks to foreign buyers and tenants. In 2019, tourism contributed 14% to the country's total GDP, according to the World Tourism and Travel Council. The Spanish authorities have high hopes for this sector in the current situation.