Nathan Allen

MADRID (Reuters – Spain’s economy grew at the fastest rate in over 20 years, but it slowed to a crawl in the fourth quarter because of a decline in private and public spending.

According to preliminary data released Friday by the National Statistics Institute (INE), the Gross Domestic Product grew 5% versus a historical 10.8% slump in the prior year.

Although this was the highest growth rate since 2000, it still fell short of the 6.5% government goal.

The INE cut its second and first quarter growth readings in September by an unheard of amount. This shook all previous forecasts and triggered a series of down revisions. However, the government remained true to its bullish outlook.

Spain is still behind France in terms of growth, with 7% annually after 2020’s milder contraction. However, Spain did better in the fourth quarter due to Omicron’s gentle approach.

Despite lower spending an 8.5% increase in investments drove 2% quarter to quarter growth during October-December. Although slower than 2.6% over the prior three months, it comfortably beat the 1.4% forecast by Reuters polled analysts.

France’s economic growth was just 1.7% during the same period.

Spain’s fastest growing sector was agriculture, which grew by around 9% during the quarter as harvests of olive and autumn grapes began.

Annually, the economy increased 5.2% over the fourth quarter of 2020. This was led by a leap of 19.4% in the hospitality industry, which has been enriched by the wide spread of coronavirus vaccinations and lifting restrictions on socialising.

Jose Luis Escriva, Social Security Minister, stated that a slow recovery in tourism (which accounted for around 12% GDP prior to the pandemic) was holding back growth, but pointed out solid job data as an encouraging sign.

Unemployment has fallen to its lowest point since the financial crisis. However, job creation is up at an unprecedented pace since 2005. These factors have contributed to record-breaking tax collection.

With the help of the expansion of the budget and the availability of additional European Union recovery funds, the government anticipates that there will be 7% in growth. The central bank however, predicts an increase only 5.4%.