Page 27 - economic report 2021

2. Prospects

The outbreak of the war in Ukraine lowered the very positive economic forecasts anticipated
for the Spanish economy in 2022. After the impact of the Omicron variant that began at the end
of 2021 was lower than feared, and the percentage of the fully vaccinated population in Spain
passed 85%, it was hoped that inflationary pressure would ease off over the first few months of
2022 and the recovery in tourism would enable the Spanish economy to recover pre-pandemic
GDP levels in 2022. However, these forecasts were reduced due to the effects of the war in
Ukraine. Although a recession is not expected over the next few months, an economic slowdown
is expected due to the context of global deceleration and the impact of high inflation, which has
reached the highest levels in three decades and will weaken private consumption.

The Spanish economy maintained its momentum until the start of 2022, but the supply
interruptions and rising inflation in the context of the war slowed economic activity from the
end of February. As a result, real GDP grew 0.2% in the first quarter (compared with 2.2% in the
last quarter of 2021), dragged down by strong contraction in private consumption due to the
loss of household purchasing power. GDP is
The recovery slows in the still 3.5% below the pre-pandemic level in this

f rst quarter of 2022 due to the quarter. Harmonised inflation reached a high in
ef ects of the war and inf at on. June (10%) and underlying inflation rebounded
5.4%. Wage growth will accelerate but at a
slower rate than prices, which will result in a
loss of household purchasing power and a fall in the household savings rate in future. However,
although consumer and business confidence has deteriorated, job creation is performing well
and a record level of employment was reached, with more than 20 million workers. Added to this 25
figure are the positive effects of the labour reform passed at the end of 2021, which led to an
increase in permanent employment.

In 2022, the growth rate of the Spanish economy will slow to around 4%, according to the
European Commission, the OECD and the IMF, although it will still be among those to grow most in
the Eurozone (alongside Portugal and Ireland).
High inflation and uncertainty will reduce Spain will be one of the countries to grow
household consumption. Supply bottlenecks most in 2022, despite high uncertainty.
will also limit private investment, while the

TREND IN HARMONISED CONSUMER PRICES IN SPAIN - Interannual variation rate, as %
Chart 3.4 The external environment of the Andorran economy | III. The Spanish economy

General inf at on Underlying inf at on
Source: Eurostat.