Isla warns that the housing crisis could be a drag on economic growth.

BarcelonaThe president of the Generalitat (Catalan government), Salvador Illa, has warned that the housing crisis could harm economic growth in Catalonia, which in recent years has far outpaced that of Spain and Europe as a whole. "Housing can be a burden if not addressed properly," he declared on Monday. Illa asserted that problems with access to housing could become a "bottleneck" that negatively impacts both the development of the Catalan economy as a whole and social cohesion. This year, the government approved a loan program to help young people pay the down payment on an apartment and agreed with ERC and Comuns the construction of 50,000 homes.

Thus, Illa has defended left-wing economic policies: "Our country has not done badly by raising the minimum interprofessional wage, revaluing pensions, or the minimum living income," he said at the presentation of the 2024 Annual Report on the Catalan Economy prepared by each. He stressed that business profits have continued to grow despite these measures. In this sense, the president has argued that the good growth rate of the Catalan economy must allow for "shared prosperity" that ensures wealth creation reaches all strata of society.

The report, presented at the Palau de la Generalitat, includes data that were already known. The Catalan gross domestic product (GDP), which is the indicator that measures economic activity, increased by 3.6% in 2024, four-tenths more than the Spanish average and four times more than the 0.9% in the eurozone. Despite the positive figures, Isla declined to boast about the data: "It's not just my government's merit; our merit is not having messed it up. The credit goes to everyone and comes from afar," he noted.

"Five years ago, everything looked very bleak, and the right measures were taken at the European level," Illa added, referring to the years following the pandemic. Among the measures he considers positive are the commitment throughout the European Union to growing the economy through investments channeled into the European Next Generation funds and the fact that "there was no fear of debt," which allowed states to increase public spending when the economy came to a standstill due to COVID.

In fact, both Catalonia and Spain have increased their debt since the outbreak of the pandemic, but have been reducing it again in the last three years. "They ask me five times a day to lower taxes," he said, referring to employers' demands that Catalonia has too much tax pressure, but the president reminded them that "the debts must be repaid."

More productivity and more workers

The strong growth recorded in Catalonia last year is due to several factors: first, population growth via increased immigration: the vast majority of new jobs have been filled by foreign workers. Second, the strong labor market, with more people employed than ever, also improved household consumption, something that has been going on for at least three years. Finally, the foreign sector (exports of goods and record tourist arrivals) and government spending and investment—both public and private—also grew last year.

The investment chapter has two parts. On the one hand, the healthy economic situation increases tax revenue, which gives city councils, the Generalitat (Catalan government), and the Spanish government greater room to allocate more money to investment, in addition to increasing spending. In addition to normal investment, we must add that we are in the middle of the six-year period that will lead to the arrival of the Next Generation. Regarding private investment, companies had more access to credit in 2024 than in the immediately preceding years thanks to the interest rate cut by the European Central Bank once the episodes of high inflation in 2022 and 2023 were over.

The Department of Economy's report also highlights the recovery of productivity after years of losses during the pandemic. GDP per capita—a common measure of how productivity is evolving in a region—closed last year above 2019 levels, the last before the arrival of Covid. While Catalan GDP had already recovered in 2022, GDP per capita took longer, showing how growth in recent years has been primarily extensive; that is, based on the increase in population and the number of workers—the aforementioned influx of immigration—rather than on the productive capacity of companies.

However, total factor productivity (TFP, one of the key indicators for calculating a country's productivity) "has contributed 1.8 percentage points to GDP growth and has now made notable contributions for four consecutive years, following a drop of 4.9 percentage points in 2020 due to the pandemic."