Spain last EU economy recovery says America Bank - Spain is one year behind: why it will be the last European economy to recover, according to Bank of America.
Little by little, after the collapse of 2020, economies are emerging. By September 2021, the European Union had already recovered its precovid levels. Germany, Belgium, Ireland, Italy, the Netherlands, and France did it in the fourth quarter... All the major European economies, except Spain.
Spain is still poorer today than when the COVID-19 crisis began, and in fact different organizations, such as the OECD or the IMF, predict that it will be one of the last advanced economies to recover lost ground.
"We expect Spain to reach prepandemic levels by the end of 2022.
We are a year behind," explains Rubén Segura-Cayuela, chief economist for Spain at Bank of America.
Spain last EU economy recovery says America Bank
But why? There are several reasons why the Spanish economy has become the last of its kind.
1. Spain, the economy that suffered the most in 2020
The first has to do with the fall in GDP suffered in 2020. Spain will take longer to recover the lost ground basically because it has more lost ground to recover.
"The gap of the current level of GDP compared to the one before the pandemic is 6.6 percentage points in Spain (compared to 0.5 percentage points in the euro area)," the governor of the Bank of Spain, Pablo Hernández de Cos, recently explained.
The impact of the pandemic translated into a historic collapse of 10.8% of Spain's GDP in 2020, something not seen since the Civil War and one of the biggest declines among advanced economies.
To put it in context, in 2009, during the crisis, the fall in GDP was 3.9%, less than half of what it is now.
This, explains Segura-Cayuela, is since "the economic structure of Spain is much more dependent on sectors that are very intensive in social interaction, such as tourism, which are precisely those that are most delayed in terms of recovery".
However, even so, there are economies such as Italy or Greece, also very exposed to tourism, and that have already recovered precovid levels...
Spain last EU economy recovery says America Bank by GDP measures
2. GDP measurement errors?
The second, Segura-Cayuela points out, may have to do with problems of measuring GDP. "The models today are very volatile," he explains.
More voices are wary of the GDP data published by the National Statistics Institute, arguing that there could be problems that are not measuring GDP well.
The INE itself has already advanced that some of its forecasts have been made with less preliminary information. This has led, for example, in 2021 to double-check its growth data in the second and third quarters, respectively.
Highest energency dependance in Spain last EU economy recovery says America Bank
3. Spain, one of the economies with the highest energy dependence
The economic recovery is having two burdens: the first, the restrictions by new variants, which do not end up leaving and affect mobility and sectors dependent on tourism. The second is the inflationary spiral, which is purging the purchasing power of consumers.
It turns out that Spain is a victim of both cases. The Spanish economy is very dependent on tourism, but also on energy.
"Spain is one of the countries in the world that buys more energy from other economies," adds Segura-Cayuela. "This is something that hasn't helped us in 2021 and it's not going to help us in 2022."
One example is price escalation. The light began to hit historical highs in Spain before and with greater virulence than in the rest of European countries. The same goes for inflation. Why? Because of the price structure, which places the Spanish economy at the forefront of impact.
This affects the recovery because it is a component that cuts the purchasing power of households. If citizens have less income, consumption retracts, and Spain's economic structure is highly dependent on domestic demand.
