The INE raises GDP growth by 4 tenths in 2021, to 5.5%, due to higher family consumption

The Spanish economy is even further from recovering GDP (Gross Domestic Product) prior to the pandemic shock than previously calculated. The National Institute of Statistics (INE) has revised this Thursday its figures on the growth of activity during the past year and in 2020. Compared to 2021, it has raised the increase in GDP by 4 tenths, to 5.5%, due to the increased household consumption. However, the COVID hit was even worse: the contraction was 11.3%, 5 tenths deeper.

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The GDP would then remain, at the end of the second quarter of this 2022, at 2.8% of the level of the fourth quarter of 2019, just before the pandemic. Three tenths further than before this update, when it was already the economy furthest behind in the recovery among the large ones in the eurozone. After also being one of the most damaged by the greater weight of tourism, which until this summer has not experienced its first full high season, without restrictions, precisely since 2019.

“This INE review [ya con nueva presidenta, Elena Manzanera] it is transferred directly to growth in 2022 and also to forecasts”, lament different economists. A greater rebound in 2021 means more inertia at the beginning of the year, in which Spain has stood out for its growth figures, but it could also mean deflation in the second half, which is already suffering from the slowdown due to the energy crisis, and of inflation in generaland by the uncertainty due to the Russian invasion of Ukraine.

"This review certifies the strong recovery of the Spanish economy that all economic indicators have been showing, driven by the strength of domestic demand and the good behavior of the labor market," they defend from the Ministry of Economic Affairs.

The data from the Annual Accounts show a greater contribution from domestic demand, which grew by 5.2% compared to the 4.7% advance, thanks to the greater dynamism of household consumption, which grew by 6%, 1.4 points more than advanced data. For its part, the growth of investment is maintained, although it is adjusted downward, as well as the consumption of Public Administrations“, they detail from Economy. "External demand is revised slightly downwards, although it maintains the positive contribution, which stood at 0.3%", they conclude.

Estimates suggest that Spain will avoid a technical recession [dos trimestres consecutivos de contracción de la actividad económica], in the coming months. Forecasts that also indicate that Germany and other economies more dependent on Russian gas will suffer more in the fall and in terms of investment due to the threat of a cut in supply.

The Harm of Runaway Price Rises and Interest Rate Hikes [como receta del Banco Central Europeo (BCE) para dejar de alimentar la inflación] in consumption and in business activity will be more palpable in our country in 2023.

“Growth in 2022 picks up because the second quarter was stronger than expected and we anticipate a decent third quarter,” says Rubén Segura-Cayuela, strategist at Bank of America. "The last stretch of normalization (especially after what seems to have been a very good tourist season) is helping in the middle part of the year," he continues.

“And we believe that Spain will manage to avoid a technical recession. However, although it will avoid rationing [de energía] Dadaist less dependence on Russian gaswe think that the energy price shock and the persistent supply uncertainty will weigh on the country, especially given the high sensitivity of the Spanish economy to persistently high prices”, regrets the economist.

Bank of America and other institutions thus recognize the explosion in demand in the face of the first tourist season without restrictions due to COVID since 2019, and the boost provided by the stimuli of the pandemic and those that have now been deployed in the face of the impact of the Russian invasion of Ukraine, despite the blow of inflation originating precisely in the energy crisis exacerbated by the war.

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