Published on Monday, October 10, 2022

Spain | Doubts (and a glimmer of hope) heading forward

BBVA Research expects GDP growth to reach 1.0% in 2023, down from 4.4% in 2022, which would push back the prospect of returning to pre-pandemic levels at least until the end of the year.

Key points

  • Key points:
  • The slowdown in economic activity can already be seen and is due to a loss of purchasing power. If we analyze the terms of trade (the prices of exports versus imports), or the GDP deflator with respect to consumption (the price of what we produce versus what we consume), we can observe a degree of impoverishment that is unlikely to reverse in the short run.
  • Central banks have decided to press forward with interest rate hikes and will likely go beyond the mark where they had initially planned to stop. As a result, the 12-month Euribor has risen by more than 250 basis points this year, which will increase the financial burden on the private sector. This could knock about one percentage point of growth off household consumption as we move through 2023.
  • There are also doubts concerning the recovery process following the historical revision of the national accounts series carried out by the Spanish National Statistics Institute (INE). In particular, the level of investment since 2020 has been corrected downward.
  • Another key finding is that consumer spending among non-residents in Spain in the second quarter of 2022 looks to be 16% higher than the level reported three years ago.
  • Notably, however, there are two sources of hope for the future: the upward revision of household savings by the INE and an expected acceleration in the implementation of Next Generation EU funds.

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