Pablo Hernández de Cos: Speech - Cinco Dias Business Innovation Awards ceremony

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the 16th Cinco Dias Business Innovation Awards ceremony, Madrid, 4 December 2023. 

Central bank speech  | 
15 December 2023

Good morning everyone. It is an honour to take part in the Cinco Días Business Innovation Awards ceremony and to be able to congratulate all the award winners for their contribution to business innovation.

As leading economists such as Paul Romer, Robert Lucas, Philippe Aghion and Peter Howitt underlined in their pioneering work, innovation is the main driver of economic growth. In a standard macroeconomic model, growth is often limited by diminishing returns on productive capital accumulation, but innovation, which faces no such constraints, is an inexhaustible source of growth.

Spain's negative investment gap in research and development and innovation (R&D&I) relative to the euro area as a whole has adversely affected the dynamics of our productivity and GDP per capita.

In particular, between 2000 and 2021, the ratio of R&D&I expenditure to GDP stood at 1.2% in Spain, 0.8 percentage points (pp) below the figure for the euro area overall. Both public and, especially, private sector R&D&I investment contributed to this gap.

At the same time, productivity (measured by GDP per hour worked) and GDP per capita in Spain in 2022 stood at 14% and 17%, respectively, below the euro area average.

This lack of innovative dynamism points to structural weaknesses in different aspects, especially including the corporate funding structure, business demographics, the level of competition, human capital and the role of general government. I would like to briefly address each of these now.