CaixaBank Research expects public consumption growth to moderate after the post-Covid peak.

CaixaBank Research predicts that the pace of growth in public consumption will continue the moderate path already seen in 2024, following the peak recorded after the Covid-19 pandemic.

This is reflected in the study titled " Why has public consumption grown so much in recent years?", prepared by CaixaBank Research economist Oriol Carreras.

The report shows that the increase in public consumption following Covid-19 reflects both the consolidation of higher healthcare spending following the pandemic and the rise in interest rates.

However, as pressures on these items, especially those linked to interest rates , ease in the coming quarters, estimates from CaixaBank's research department point to a moderation in the pace of growth in public consumption.

The share of public consumption in GDP increased from 18.7% on average between 2015 and 2019 to 21.7% in 2020, the year of COVID-19. The sharp increase in its share is explained by the support provided by public authorities to the economy during that year, but also by the collapse of GDP.

Since 2021, the peso has moderated, thanks to the strong recovery in GDP during the period, but in 2024 it stands at 19.4%, seven-tenths of a percentage point above the pre-pandemic peso.

According to the report, the growth in public consumption in recent years has been driven primarily by increased intermediate consumption, especially in the areas of health, general public services, and economic affairs.

The greatest growth within the health category is due to increased spending on hospital services, outpatient services, and public health services. These categories include the cost of services provided to patients in outpatient clinics and hospitals, as well as the cost of products used to provide these services, such as the cost of medications supplied or medical equipment. In this regard, it is evident that the increase in health spending has consolidated after the pandemic.

Within the general public services category, public debt operations stand out, an item indirectly affected by the increase in interest rates, and, to a lesser extent, general services.

Finally, within the category of economic affairs, transportation stands out above all, and to a lesser extent, agriculture, forestry, fishing and hunting, and other activities.