Spain Economic Outlook. Second Quarter 2022

Summary

GDP growth in Spain is revised downwards to 4.1% in 2022 and 3.3% in 2023. The main reasons are the Ukraine's invasion, the sanctions imposed on the Russian economy and the increase in prices, especially energy related, over the last few months.

Key points

• Key points:
• The global economy will slow down more than forecast three months ago. After expanding 6.1% in 2021, global GDP is expected to grow 4.0% this year and 3.6% the following. The downward revision to growth is significant in Europe and moderate in all other geographies.
• Spain's GDP would have advanced 1.4% q/q in 1Q22. Social Security enrolment and card spending increased, although the acceleration of inflation could be affecting consumption.
• The recovery could accelerate in the last part of the year, supported by private consumption, tourism and investment. Accumulated savings and lower COVID-19 restrictions will support the expansion of household spending. The good performance of the housing market and NGEU funds should support more investment-led growth.
• Public policies will be key to minimise the war effects. The fall in electricity prices will be important. Without a rent-price pact, the uneven impact of inflation may increase social unrest. An inflationary spiral may occur if real wages grow above productivity. Uncertainty about investment linked to the NGEU persists and spending could leak into higher imports in the face of supply constraints.

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