Is the Spanish economy doing well or not?

by Lorraine Williamson
Spanish economy

MADRID – In the run-up to the elections in Spain, the economy is one of the main topics of the debate between the two main candidates: Pedro Sánchez of the PSOE and Alberto Nuñez Feijoo of the Partido Popular. 

Feijóo describes the Spanish economy as “stalled”, while Sánchez is particularly positive about the development of the economy in recent years under his government. “If we have just recovered the 2019 GDP, it means that our economy has been at a standstill for five years,” Feijóo said at a party rally on June 26. On the other hand, the socialist Sánchez has repeatedly stated that the country’s economy is running “like a motor”, as he said on June 29. 

But what is the real situation of the Spanish economy? Is Feijóo right, is Sánchez right, or are they both right? Fact-check website Newtral investigated and concludes that according to the experts in this field there is “no absolute truth”. The statements of both candidates can therefore be both correct and incorrect. 

The key: the reference year in comparisons 

In conversation with Newtral.es, both José Emilio Boscá, Professor of Economic Analysis at the University of Valencia and researcher at Fedea, and Manuel Hidalgo, Professor of Applied Economics at the University of Pablo de Olavide (UPO) in Seville, explain that it depends on which year is taken as a reference in the comparison, who is right. 

“If we take 2019 as a reference year, we have a lower GDP which we only recovered in the first quarter of 2023, so you could say that the economy has stalled: GDP is now the same as four years ago,” says Boscá. However, as the professor points out, “if you take the last two years as a reference, the economy is growing quite fast given factors such as the Ukraine crisis.” 

Hidalgo emphasises that different times are compared here. “Since 2019, there has been an event [the lockdown due to the coronavirus] that affects the entire period you are comparing,” said the expert. 

“Spain has done worse” during the pandemic 

Both analysts acknowledge that the Spanish economy contracted more than that of other countries in 2020 and that the recovery took longer. “Spain has done worse and that affects every measure,” says Hidalgo, pointing to factors such as stricter pandemic measures and the importance of tourism in Spain, which is greater than in other countries. 

After the pandemic, Spain has done better 

However, since then and with the exception of early 2021, “Spain has significantly outperformed the rest of the European countries,” emphasises the UPO professor. In fact, according to data from the European statistics agency Eurostat, the Spanish economy grew the most in the first quarter of 2023 compared to the same period last year. 

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As Boscá concludes, “to talk about growth, we have to indicate which years are taken as a reference”. If we take 2021 and 2023, the Spanish economy has grown as Sánchez claims, but not the period between 2019 and 2023, as Feijóo claims. 

Other indicators 

“At the moment, the macroeconomic conditions in Spain are better than in the rest of Europe, although they are not great,” Hidalgo explains. The expert emphasises that what Feijóo says is true because the context of Covid-19 must be taken into account, but that what Sánchez claims about the macroeconomic situation is also correct. “One does not exclude the other,” he emphasises. 

Inflation in Spain is among the lowest in the EU 

Hidalgo defends that Spain is no longer the country that has done the worst since 2019. As the professor of the UPO points out, inflation in Spain is among the lowest in the European Union, according to Eurostat, and its performance in terms of foreign trade is positive. 

Nevertheless, although GDP is growing faster than in other European countries and some conditions are also better, Hidalgo points out some important nuances when analysing the situation in Spain. “When we look at the development of the household economy, such as consumption, things are not going so well,” he explains, adding: “If the rest of the economy is doing well, it is because there is something that compensates for the fact that households consume less, such as exports, which are growing strongly.” 

Also read: Spanish economy is the fastest growing in the EU 

Both Sánchez and Feijóo also pointed to the labour market when describing the situation of the Spanish economy. Hidalgo explains that while the number of working people is growing, the jobs created are “not very good”, as the socialist states. Feijóo, on the other hand, has repeatedly pointed to Spain’s unemployment and its leading position in Europe in this regard, but Hidalgo reminds us that this has always been the case: “It is a structural problem”. 

In conclusion, the experts argue that both the claim that the economy is growing faster than in other countries and the claim of stagnation need some nuance to understand the context. Although the macroeconomic conditions in Spain are better than those of other European countries, it is important to look at the situation of households and employment. Consumer confidence and household consumption are not as strong as hoped, while the number of jobs created is growing but of mediocre quality. 

Spain’s economic situation is complex 

In short, Spain’s economic situation is complex and cannot be limited to simple statements by both political candidates. The elections will ultimately determine who will be in charge of the country and will be responsible for shaping economic policy. In doing so, a deep understanding of Spain’s economic challenges and opportunities is essential. 

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