Spain | What will happen without fiscal stimulus?

Summary

The economy is showing resilience thanks to expansionary fiscal policy and the mild impact of the Strait of Hormuz crisis. However, the expiration of public aid and European funds, together with higher costs, points to an economic slowdown during the second half of the year.

Key points

• Key points:
• The deterioration in the economy that the consensus of analysts expected is explained by the increase in the price of key inputs, weaker growth in the eurozone, higher inflation and interest rates, and greater uncertainty.
• For this reason, the strength in job creation is surprising. One key factor supporting activity is that fiscal policy is more expansionary than previously expected.
• In recent months, the use of public resources has been announced to limit the impact of higher fuel and electricity prices (€5 billion), as well as to mitigate the effects of the storms at the start of the year (€7 billion).
• Looking ahead, the concern is what will happen as some of these measures expire or are exhausted. For example, without public tenders linked to NGEU funds, the nonresidential construction investment component would be 8.8% below its current levels.

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