We identify the macroeconomic factors that affect the evolution of international tourism in Spain, including income growth in the source countries, inflation, geopolitical risk and exchange rates, and we estimate how many international tourists will visit Spain in 2024.
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The recent boom in Spain’s international tourism is having a very positive impact on the growth of the economy and of employment. However, it also has repercussions for the resident population that are not always positive, such as greater congestion due to the larger influx of tourists in certain parts of Spain. This has rekindled the debate on the need to move towards higher quality tourism.
Spain’s manufacturing has been relatively successful in overcoming the impact of the various exogenous shocks that have shaken the European economic scenario in recent years.
The key to the sustained increase in international tourist arrivals is the high sensitivity of demand to income growth in the source countries and a relatively moderate increase in domestic prices relative to the bigger increases occurring in competing destinations.
Agrifood is the main sector for Spanish industry. The sector has strong roots in Spain, generates stable employment and is very open to other markets. It also tends to have a highly fragmented business structure dominated by small firms and a few large companies that are less productive than their European counterparts. Increasing company size and boosting the productivity of larger firms through investment in R&D and adopting new technologies would help to improve the competitiveness of a key industry for the economy and society as a whole.
The interest rate hikes being implemented by central banks in order to combat inflation are leading to concerns regarding the impact such tighter financial conditions may have on real estate markets. In many developed economies, house prices have risen considerably in recent years, a trend that accelerated during the pandemic, fuelling fears of real estate bubbles. Given this situation, the authorities in several countries have implemented a series of macroprudential instruments to cool down their market. However, in Spain the risk of a real estate bubble appears to be contained.
Between 2018 and 2024, the Spanish economy experienced a substantial improvement in its relative electricity and gas prices, going from paying more than the European average to benefiting from lower rates. This decline is a result of the significant growth of solar photovoltaic and onshore wind power, the two forms of electricity generation with the lowest cost. Lower electricity prices compared to European competitors have facilitated the manufacturing sector’s good performance in recent years. This advantage in the generation of sustainable and low-cost electricity gives Spain’s industry a competitive edge over its competitors.
After almost two years raising interest rates, in 2023 the major central banks reached the peak and adjusted their strategy: instead of raising official rates further, the monetary tightening was going to be implemented by keeping rates at that peak for longer. However, by the autumn the financial markets were already questioning this narrative. Why?
Emerging countries have experienced a number of crises throughout the various cycles of monetary tightening in the US, enduring a very high economic and financial cost. What will be the consequences of the Fed’s rate hikes for their economies?
Despite the reduction of the public deficit to around 2.8% of GDP, the Treasury’s funding needs remain high, with a projected net issuance of 60 billion euros. It will also have to deal with the end of reinvestments by the ECB and the impact of interest rates on public debt.
We delve into the REPowerEU plan, approved in May by the European Commission, and its measures to accelerate the energy transition envisaged in the Green Deal and the Fit for 55 package.