In 2023, Spanish households and companies once again reduced their debt over GDP. In fact, with the exception of the year of the pandemic, they have not stopped doing so since 2009. Currently, they define a ratio that is not only close to half of the historical maximum reached that year (204.2%), but is also (111.6%) at the lows of more than two decades ago. The extreme vulnerability due to excess debt, which during the international financial crisis took away thousands of households and companies after years of unsustainable real estate boom, has been transformed into a comfortable financial position; better, at least, than in the average of European countries.In households, the reduction of their financial leverage has been linked during these years to the containment of investment (mainly, housing) after the excesses committed. Also to the reduction of the financial costs they borne, in the context of a zero-rate monetary policy implemented by the ECB during the years after the crisis. All this in a framework of very low inflation and moderate growth in gross disposable income and consumption. Leaving aside the anomalous behavior of the pandemic period, the scheme has been partially modified after the sudden emergence of inflation and the rapid increases of rates undertaken by the ECB to contain price increases. But in this new context, neither the process nor the pace of household debt relief has ceased. This is due to the sustained GDP growth in Spain during the post-COVID period, which has been accompanied by a solid expansion of employment and the recent increase in wages in the wake of inflation, which has substantially boosted the gross disposable income of households. . Of course, above consumption, which is showing restraint in a context of a certain slowdown and greater future uncertainty, inducing a higher savings rate, now above its historical average levels. In this situation, which is also combined with the difficult access to home ownership, families are allocating part of their savings to continue repaying debt. Also, on the other hand, to acquire financial assets, also moving their financial wealth from liquid assets that do not generate interest, to time deposits, treasury bills or investment funds. The debt reduction effort is not being less intense in the case of the companies. Its financing capacity, above the weakest investment effort, is also translating into debt repayment. Uncertainty weighs, like a stone, on investment decisions, especially at a time like the current one, in which a good dose of uncertainty prevails. Bank balance sheets continue to show this absence of credit demand, although their (good) results are supported by high rates and low default rates. Daniel Manzano and María Romero are professors at Afi Escuela. Follow all the information on Economics and Business on Facebook and xor in our weekly newsletter
Subscribe to continue reading
Read without limits_