Spain pushes back recession specter with 5.5% growth

The Spanish engine handles the shock better than expected. According to the first estimates published by the National Institute of Statistics on Friday, growth was 5.5% in 2022, which is more dynamic than the 3.3% expected by Brussels for the entire euro zone during this period.

Spain added about 280,000 jobs during the year and lowered the unemployment rate to 12.9%, the lowest level since 2008. All indications are that the risks of an imminent recession are receding and the indicators are promising, with a 24% increase in exports and 33 billion in international investment in the country in 2022.

“We are facing the prophets of the apocalypse, today we have strong growth, the lowest inflation in Europe and a job record,” Prime Minister Pedro Sánchez said on Twitter, presenting these good figures as a result of the implemented policies. against inflation, between supporting the purchasing power of the most vulnerable population and controlling energy prices.

Slowing down in the second half

The question is whether the momentum will continue, as second-half data suggests a sharp slowdown and 2023 looks more modest. Growth was just 0.2% in both the 3rd and 4th quarters, and after a great start to the year, the unemployment rate has modestly started to rise again by a few tenths. No worries for Economy Minister Nadia Calviño, who stressed the “strong resilience of the Spanish economy” and its ability to bounce back quickly.

Analysts at the Nomura firm, however, worry about the spurious effects of an economy artificially boosted by the infusion of funds from Europe’s recovery plan. They stress that “apparently strong global figures mask the weakness of fundamentals” and point out that Spain, unlike France or Germany, has yet to recover its newfound pre-pandemic wealth. According to IMF forecasts, it will have to wait until 2024 to achieve this.

Nevertheless, so far Spain has managed to get through the air pockets without major crashes unlike what happened during the 2008 financial crisis, which is already a big win for Madrid. . Since the onset of the energy crisis, the country has relied on safety nets put in place by government agencies, as well as the efforts of families drained of savings, to cushion the shock of inflation.

At the same time, labor market reform promoted job stability, especially in the construction or service sectors, instead of the usual chain of precarious contracts, which helped to give the middle classes a reassuring visibility and open new horizons. for young workers.

1.3% growth in 2024

According to Oriol Carreras, an economist at Caixabank Research who forecasts 1.3% growth in 2023, this context allows for a scenario without major shocks in the short term. 2022, as well as the adjustment of energy prices, will largely offset the impact of high interest rates”, he emphasizes that Spain is quite well prepared to face the uncertain international panorama. Household debt does not represent a major imbalance, with 54% of GDP (compared to the eurozone average of 58%) and a real estate market showing no signs of overheating.

An economist at Caixabank Research notes that “Spain is relatively better positioned to face an energy shock than other major European economies” and points to a low dependence on Russian gas (which will account for only 9% of total gas imports for Spain in 2021). constituted). 38% for Italy or 65% for Germany) and large LNG import capacity will allow the country to better diversify its sources of supply.