banks'business models and their future profitability. moreover, by establishing a harmonised framework for its supervisory activities through the single rulebook, the ecb has reduced the fragmentation that existed previously. and the srep reform is another important milestone in our efforts to better assess risks while stabilising the methodologies we use. however, much of the work that still needs to be done falls outside of the ecb's remit. a strong supervisory framework plays a key role in supporting the growth and competitiveness of the economy but will never replace the need for structural reforms to boost productivity. 3 / 4 bis - central bankers'speeches other factors will also play a major role, such as changing demographics, including ageing societies, and geopolitical risks. overall, the profitability of european banks has increased significantly in recent years, but they need to continue adapting to a changing environment presenting a cluster of challenges. long - term investment and a strong capital base will be crucial for banks to meet these challenges. from the ecb's perspective, there is no room for complacency. 1 directive 2013 / 36 / eu of the european parliament and of the council of 26 june 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending directive 2002 / 87 / ec and repealing directives 2006 / 48 / ec and 2006 / 49 / ec ( oj l 176, 27. 6. 2013, p. 338 ). 2 conference of the parties ( or " cop " ) to the united nations framework convention on climate change ( unfccc ). 3 di vito, l., martin fuentes, n. and matos leite, j. ( 2023 ), " understanding the profitability gap between euro area and us global systemically important banks ", occasional paper series, no 327, ecb, august. 4 ecb ( 2024 ), digitalisation : key assessment criteria and collection of sound practices, 11 july. 4 / 4 bis - central bankers'speeches

the case of investment and private consumption. traditionally the mainstays of stable growth in any economy, these components looked to have performed worse than expected. over a longer time frame, investment has proven significantly less dynamic than activity since the pandemic, with the transport and housing components performing particularly poorly. by sector, while the 2023 public investment - to - gdp ratio stood well above its pre - pandemic level, the private investment - to - gdp ratio remained more than 10 percentage points below that figure. using data from the banco de espana's central balance sheet data office to analyse these developments at firm level, 1 it would appear that this state of affairs is in part attributable to the fall in the share of firms investing, particularly in the sectors hardest hit by the pandemic, as well as to the decline in investment in young firms. moreover, productivity remains notably weak, potentially acting as a brake on economic growth over the medium and long term. this sluggish productivity may be contributing to the rise in unit labour costs, which could undermine spain ’ s international competitiveness. against this backdrop, the latest short - term indicators suggest that economic activity in spain should remain notably buoyant in the opening months of 2024. a similar conclusion can be drawn from the figures on social security registrations ( up 0. 7 % in the first quarter ) and the purchasing managers ’ indices ( pmi ), which, in their composite version, stood in march at their highest point since may last year. looking ahead, the outlook for growth in the spanish economy in the coming years remains fairly encouraging. in particular, based on the banco de espana's latest projections, the gdp growth rate is expected to stand at 1. 9 % in 2024 and 2025, before gradually converging towards levels more in keeping with the spanish economy's growth potential towards the end of the projection horizon ( with gdp growth of 1. 7 % in 2026 ). noteworthy among the factors underlying these projections are the gradual reactivation of the european economy as the negative impact of monetary policy tightening slowly fades, the recovery in economic agents ’ real income, the population growth envisaged and the fiscal impulse from the next generation eu ( ngeu ) programme. conversely, the notably weak investment and sluggish productivity of recent quarters will weigh on the future pace of output growth. meanwhile, activity will be adversely impacted as certain tailwinds that have recently driven growth