The winter forecasts from the European Commission confirm that the positive momentum of the Spanish economy largely stems from the achievements of the external sector. Our productive fabric is gaining market share in foreign markets and outperforming imports, showcasing its competitiveness. Production costs have evolved favorably due to the availability of relatively abundant and cheap energy compared to central European economies.
However, Brussels’ data also unveils the primary weakness of our model: the limited advancement of productivity, which, if not reversed, condemns us to compete with stagnant wages while complicating the funding of the welfare state. Over the past decade, our productivity has increased by just 4.2%, compared to the eurozone’s average of 5.3% (based on GDP per hour worked). This differential hasn’t substantially changed since the pandemic, nor with the injection of European funds.
A sectoral breakdown helps to understand the origin of the productivity gap. Two sectors stand out from the stagnation observed at the aggregate level. Firstly, manufacturing, with an increase in value added per employed person of over 4%, a rate higher than that observed in other major European economies. Additionally, high-value-added services, grouped within the branches of information, communications, and professional, scientific, technical, and administrative activities, also experience a relatively high productivity growth (significantly higher than the average of Germany, France, and Italy). However, the remaining service activities and the primary sector, considered as a whole, show a decline in productivity, dragging down the overall result.
The thriving sectors are characterized by both a marked export bias and business size above the national average, stimulating improvements in work organization and the pursuit of production efficiency. They share a lesser reliance on the domestic market and fragmentation due to various territorial regulations, which hampers business size and efficiency in crucial sectors such as construction.
The sectoral disparity in productivity also underscores the importance of a cross-cutting strategy, as the dynamism of the most active sectors doesn’t seem to transfer to the rest of the activities (evidence of the absence of the trickle-down effect).
Thus far, the cross-cutting nature promised by European funds hasn’t been achieved, judging by the meager execution results, particularly in the field of digitalization. The annual reports of the main public agencies in the technology field show inexplicably low execution rates. And a program that has been executed, such as the digital kit, doesn’t seem to have resulted in an increase in investment or a higher growth in the size of SMEs. European funds are having a more tangible effect in some sectors such as electric vehicles, but even in this case, the impact falls short of expectations due to the slow deployment of the supply network and charging stations, a consequence of various administrative bottlenecks.
The good news is that a portion of the productive fabric is making headway in technological change, energy transition, and the reconfiguration of globalization. However, this progress isn’t filtering through to the rest of the economy, dragging down overall results and widening inequalities. All of this highlights the relevance of horizontal policies, such as internal market competition, tax and financing reform to facilitate the emergence of more productive medium-sized companies with higher wages, or aligning training supply with labor market needs. In terms of productivity, equality of opportunities is key.
INDUSTRY | Productivity in the manufacturing industry has increased by 4.4% since the pandemic (in terms of value added per employed person, comparing the first three quarters of 2023 with the same period in 2019). This result surpasses the 3.6% recorded in Germany. Meanwhile, France and Italy report declines of 7.8% and 2.6%, respectively. Due to lack of data, it’s not possible to determine to what extent these differences stem from structural changes or temporary phenomena of employee retention in countries most affected by the energy crisis.