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Published on Tuesday, November 2, 2021

Spain | Less growth and more inflation

The best reasons to assume that the recovery in Spain will continue over the next few months are the high vaccination rate and the wealth accumulated by certain households during the crisis. Both factors will enable household expenditure to continue to rise, as it has in the last six months.

Key points

  • Key points:
  • At BBVA Research, we have revised our GDP growth forecasts down from 6.5% in 2021 and 7.0% in 2022, to 5.2% and 5.5%, respectively.
  • This outlook still allows for a return to pre-pandemic growth levels next year, but shifts it from the beginning of 2022 to the end. The main support for recovery will come from private consumption.
  • The level of household net financial wealth in the first quarter of 2021 was above that of December 2019. Going forward, households are expected to continue these spending patterns, at the very least until the Christmas and New Year holidays.
  • In any case, firms face a scenario of tightening margins, with a clear increase in costs—principally due to the disruption of value chains and the considerable increase in electricity prices—possibly pouring a certain amount of cold water on economic recovery.
  • The delay in utilizing NGEU funds is another key factor. The autonomous communities, who the Spanish Government has trusted with spending this money, appear overwhelmed by responsibility. Our forecast at the start of the year was that the 20 billion euros plus, announced by the Government, would end up not being deployed and that it was more likely to be between 10 and 15 billion euros.

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