Spain defies inflation with good economic data

by Lorraine Williamson
Spain shows economic growth

MADRID – The Spanish economy grew by no less than 5.5% last year. This puts Spain in a better economic position than most northern European countries. Tourists have returned en masse and the construction of houses on the coasts seems booming again. 

All this despite the war in Ukraine and the energy crisis. Tourism and the construction sector in Spain are therefore still the major engines behind this economic success. In the entire eurozone, growth in 2022 was estimated at 3.5%. Even the Spanish Prime Minister seemed pleasantly surprised when the latest figures for 2022 were published. The IMF also predicts above-average growth for the Spaniards for 2023 and 2024. “Our country is getting through the crisis better than the countries around us,” said Pedro Sánchez, not without pride. 

Related post: Spain is allocating up to 10 billion euros for the expansion of crisis support 

Growth has pushed unemployment in Spain to its lowest level in 15 years, although it is still alarmingly high at 13% and the quality of many jobs is still open to debate. Unemployment in the EU averages 6.1%. Apart from that, Spain is also doing a lot to fight inflation. This amounted to only 5.5% in December 2022, while it was 10.4% in the EU as a whole. 

Spain, governed by a left-wing socialist coalition, managed to turn the spiral of inflation mainly through government intervention in food, rental and energy markets. The expenses that have the greatest impact on consumers’ wallets. The brake on the electricity price that Spain introduced in the summer of 2022 seemed to set a precedent. In December, the EU also agreed on a ceiling. Spain is now among the countries with the lowest electricity rates. 

In addition, the Spanish government put a brake on the rental of apartments, which is now also being discussed throughout Europe. This means that the annual increase in rental prices for homes is now limited to a maximum of 2%. Until then, rents in Spain could be raised in line with the pace of price increases, leaving many apartment tenants in trouble. 

Cogesa Expats

Cost: 45 billion euros 

At the beginning of 2023, Spain took an extra step to protect citizens against the consequences of the inflationary crisis: VAT on basic foodstuffs was abolished. Bread, flour, milk, eggs, cheese, fruit, vegetables and grain products became cheaper as a result. In addition, there was a state subsidy for local public transport. Short-distance trains became free and other train and bus season tickets became 50% cheaper nationwide. 

Related post: To what extent are Spanish supermarkets complying with the VAT reduction? 

“We have mobilised €45 billion,” Sánchez recently reported to the Spanish parliament. For crisis packages that mainly benefit families, but also companies. The side effect of this is that tax revenues are also increasing and are at record levels. 

To absorb the special crisis expenditure, the centre-left government of Sánchez of Social Democrats and the left-wing party Podemos also decided on a temporary solidarity levy for banks, energy companies and multimillionaires. Sanchez: “There must be a fair distribution of the burden.”  

Related post: Spain will temporarily tax large fortunes extra 

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