2023 US Investment Climate Statements (Part IV): Spain’s GDP rebound and FDI increase shadowed by high public debt, pension costs, and inflation  

This is the fourth in a series of five articles examining the US Department of State’s latest report on investment prospects for Argentina, Mexico, Colombia, Spain, and Brazil

The post-COVID recovery helped Spain to shield itself from some of the negative effects of rising energy prices and Russia’s war in Ukraine, according to the latest 2023 Investment Climate Statements report from the US Bureau of Economic and Business Affairs.

Their analysis mentions that "by building on healthy fundamentals and fueled by up to nearly 150 billion euros in Next Generation EU recovery funds, Spain rebounded with 5.1 percent GDP growth in 2021 and 5.5 percent growth in 2022, with a 1.5 percent growth outlook for 2023". Moreover, "Unemployment improved to 12.5 percent for 2022."

While the country’s economic activity is expected to reach pre-crisis levels this year, "Russia’s unprovoked war in Ukraine, high energy prices, supply chain disruptions, and inflation could weaken the recovery".
The report also notes that risks include "high public debt levels and ballooning pension costs for its aging population, coupled with high energy prices and inflation, though these areas are targets for government reforms."

However, the US Department of State considers there are plenty of advantages to investing in the country: "Spain’s excellent infrastructure, well-educated workforce, large domestic market, access to the European Common Market, and leadership on renewable energy make it an appealing foreign investment destination. Spanish law permits up to 100 percent foreign ownership in companies, and capital movements are completely liberalized".

Foreign Direct Investment (FDI) grew 13.9% in 2022 compared to 2021, with the US being the largest FDI investor in the country, as per the report.
The US Department of State highlights Spain’s stable credit rating and the high subscription for public and green bonds, as well as the use of the EU’s Next Generation recovery funds. "However, small- and medium-sized enterprises (SMEs), which accounted for more than 99 percent of Spanish businesses and were acutely impacted by the COVID-19 pandemic, still have some difficulty accessing credit and rely heavily on bank financing", the report concludes.