Recently, two emblematic publications have been presented that take stock of the Catalan economy of the previous year and point out perspectives for the current year: Economic report of Catalonia, published by the thirteen Catalan chambers of commerce for 60 years, and theAnnual report, Prepared by the Department of Economy and Finance of the Generalitat. Both publications agree in highlighting a change in the growth pattern in which domestic demand is progressively taking over from external demand, in a context marked by geopolitical uncertainty, unleashed by the reckless tariff policy of the United States.
The Catalan foreign sector is holding up very well, but goods exports are expected to grow more slowly in 2025 and 2026 than in the recent past, although they will still exceed the European average. The impact scenarios for Catalonia of the new American tariffs are estimated at an loss of between three and eight-tenths of a percentage point of GDP, depending on the outcome of the current negotiations between the two blocs. However, they will not significantly slow the momentum of the Catalan economy, which is increasingly supported by domestic demand.
On the other hand, tourism growth is observed to be moderating, although it is expected to reach historic highs by 2025. Finally, public administration consumption spending (education, healthcare, social services, security, justice, etc.) is expected to lose momentum, at least until spending on security and defense is expanded—and it remains to be seen whether it will filter out via imports.
In this context, household consumption, along with business investment, will progressively take on the role of drivers of the Catalan economy. Household consumption has displayed atypical behavior since the beginning of the decade. It was foreseeable that the savings rate would skyrocket during the pandemic, considering that the population was confined and unable to consume many products and services. What was no longer foreseeable was that the savings rate would once again climb to values around 15% of household disposable income last year, well above the historical average of 10% over the last twenty-five years (with information referring to the Spanish economy as a whole; disposable income data for Catalonia only goes up to 2022).
In short: families are spending less on consumption than they have historically spent relative to their income. This is not normal during a period of economic recovery in which employment is growing, wages are beginning to regain purchasing power, and interest rates are falling. Various factors may help explain this behavior, such as the propensity to dedicate a larger percentage of income to mortgage payments. But it remains unclear to what extent this is a temporary and transitory phenomenon, or a structural and persistent one. In the first case, a possible return to savings rates more aligned with the historical average would provide a strong boost to the growth of the Catalan economy in subsequent years.
The other leg of domestic demand is investment. Similar to what has already been discussed in the case of private consumption, until 2023, capital formation has evolved below what would be expected, taking into account the increase in corporate profits, which ultimately are the main incentive for investment. The decline in interest rates and the final stages of implementation of the European Next Generation funds have positively contributed to boosting this variable in 2024, and we should expect this upward trend to consolidate during this year and the following years.
It is worth highlighting the importance of reactivating residential investment to cover the housing deficit. And we will also need to closely monitor the evolution of business investment in capital goods, R&D, and other productive assets, as the main determinant of labor productivity. In recent years, productive investment per employed person in Catalonia, calculated in real terms, had declined, coinciding with the stagnation of productivity. The 2024 data show an increase in the resources that companies allocate to investment that exceeds the increase in employment, as well as a rebound in value added per employed person. A good sign.
However, despite the high growth of Catalan GDP in recent years, up to four times the eurozone average, it has taken five years for GDP per capita to return to pre-pandemic levels. In other words, this strong growth in the total value of what we produce as a whole as a country has not been enough to achieve a real improvement in the prosperity of Catalans, as measured by GDP per capita.
It seems obvious that the goal of shared prosperity must first and foremost involve generating prosperity. This requires systematically increasing productivity—the GDP generated by each employed person. In turn, increasing productivity requires significantly increasing productive investment per employed person, as well as the efficiency with which available resources are used, introducing incentives that facilitate it and dismantling the barriers that hinder it. It's as easy and as difficult as that.
