2021 goes down in history as the year of vaccines. In Spain, more than 76 million doses have been administered to combat the coronavirus and, today, almost 90% of the population over 12 years of age already has the full pattern. The vaccination campaign, which was slower than expected in the first half of the year, hit the gas in the second half, allowed to lift most restrictions and it has made possible the takeoff of the economy.
It is expected that Spain grows this year between 4.5% and 5%, and that in 2022 it consolidates the recovery, with GDP growth rising above 5.5%, according to the forecasts made by various organizations and entities. Spain could recover precovid levels of gross domestic product by the end of next year.
“The recovery is firm, although somewhat slowed down,” says Emilio Ontiveros, president of Analistas Financieros Internacionales. “Spain should be one of the countries with the greatest recovery from Europe next year ”, points out Nieves Benito, Head of Fundamental Research at Santander AM.
Rafael Doménech, Head of Economic Analysis at BBVA Research, believes that “the recovery has clearly gone from less to more and the level of effective affiliation prior to the pandemic has been reached again.” Less optimistic is shown Juan Carlos Higueras, economic analyst and professor at EAE Business School, which understands that “it is not a solid rebound, but very weak and unstable.” “We would still have to recover about 7 points of GDP without the effect of inflation that weighs on this growth,” he adds.
Everything indicates that the positive evolution of international tourism will be an engine of growth in Spain in 2022. This sector, which, according to CEOE, represented 12.4% of GDP in 2019, before the pandemic, barely reached 5% in 2020. Driven by national and European visitors, tourism began to reactivate in the summer of 2021, but the employers believe that, in the best of scenarios, this year will not exceed 77,200 million euros, half of what it supposed in 2019. Hope is placed in next year, for which it is expected that there is a recovery in international tourism that allows us to return to the figures of the years before the Covid.
Spain could recover precovid GDP levels by the end of 2022
The hospitality industry, one of the worst hit sectors due to the pandemic, it has begun to see the light, but it does not expect to recover the pre-crisis figures until the second half of 2023. The Spanish Hospitality Business Confederation considers that 2022 will be a year of transition for a harmed sector due to the rise in the price of electricity. This employer denounces that 60,000 establishments have not yet been able to reopen and that there are currently 110,000 fewer workers in the sector than two years ago.
European funds, key
Experts coincide in pointing out, on the other hand, that European funds, whose execution is being slower than expected and desirable, will be essential to consolidate the economic recovery in 2022.
It is estimated that the aid from the Next Generation could represent around 1.5% of GDP next year. “Spain must seize the opportunity to use these funds to facilitate the transformation of its economy, with structural reforms that increase its potential growth,” says Rafael Doménech. Along the same lines, Emilio Ontiveros believes that “these funds are very important, not only to consolidate the recovery, but to facilitate the modernization of the Spanish economy.” More critical in his analysis, Juan Carlos Higueras warns that aid “is a key element as long as it is used intelligently in productive investments and spending that has a multiplier effect, something that does not seem to be very clear that it will happen.”
Of the 24,200 million from the funds included in the 2021 Budgets, 65% have already been committed, according to the Government, which does not mean that they have already been executed. In fact, BBVA estimates that, by the end of the year, the execution could be around 8,000 million. “Execution will foreseeably increase to around 21,000 million in 2022,” says Doménech.
Spain could recover precovid GDP levels by the end of 2022
Another element that, together with tourism and European aid, is called upon to strengthen the economy in 2022 is the savings generated by households in the hardest months of confinement and restrictions, in 2020. It is estimated that Spaniards accumulate a pocketed savings of about 50,000 million due to spending that they were unable or unwilling to make at the time and which, foreseeably, will stimulate consumption next year.
The shadow of inflation
In addition to the threat posed to the world economy by the appearance of the omicron variant and the undoubted negative effect that possible outbreaks may have on the population, “the main risk for our growth scenario lies in a non-transitory environment of inflation that stresses global interest rate curves ”, affirms Nieves Benito.
Inflation, spurred by food and fuel, stood at 5.6% last November, the highest record since September 1992, according to data published by the INE.
Rising prices reduces the purchasing power of households and moderates consumption, “although not in a very significant way”, believes Emilio Ontiveros, who also recalls thathe majority of forecasts anticipate a gradual reduction from the second half of 2022.
The global energy crisis caused, among other factors, by the increase in demand, is translated into an increase in gas and electricity prices that affects families and narrows business margins. The increase in the invoice has a special impact on the intensive consumption industries which, in many cases, are being forced to reduce production to face this obstacle.
“The price of energy is expected to fall from the end of the second half of 2022, when many of the conjunctural factors that have been behind the recent rise decline “, forecast from the Fundamental Research area of Santander AM.
However, Juan Carlos Higueras recalls that “even if the runaway horse caused by inflation is stopped, that means that prices will stabilize, but in no case that they will go down. Therefore, once new price levels have been exceeded, they will be maintained over time (therefore, everything is more expensive), even though inflation is very low ”. And he adds that these high prices will be transferred via increased consumer prices.
Another of the questions that assail the markets for 2022 is how long current disruptions in global supply chains will last. Asian manufacturing companies today occupy a leading space in the global economy and bottlenecks in international trade are causing significant delays and supply problems. The Bank of Spain estimates that the worst of this crisis is yet to come and may cost our gross domestic product between two and three tenths in 2021 and between five and nine tenths in 2022, which would translate into a loss of about 13,500 million for Spain in the course of these two years.
One of the most affected sectors is the automotive industry, which is also damaged by a lack of semiconductors that in Europe alone has already caused the delay in the manufacture of half a million vehicles, according to the European Association of Automotive Suppliers.
However, the experts consulted believe that the problem is already tending to be corrected. “The latest data point to falls in the prices of transport and semiconductors. Although some with particular circumstances will take time to correct beyond 2022, most costs will tend to stabilize as the supply adjusts to the demand ”, says Nieves Benito.
Among economists there is a general conviction that in 2022 employment data in Spain will continue to improve. BBVA Research forecasts that EPA employment will increase by 3.2% next year and that the unemployment rate falls to 14%.
“The downward trend in unemployment could consolidate as mobility recovers, which will continue to drive the services and leisure sector, with so much weight in the Spanish economy,” they point out from Fundamental Research of Santander AM. “It is reasonable think that employment maintains its favorable trend, although the rate of improvement moderates ”, they point out in the same direction from International Financial Analysts.
“In any case, it will continue to be an unacceptably high unemployment rate, which, together with temporary employment and long-term unemployment, requires reforms and changes in labor regulations that resolve these structural problems,” says Rafael Doménech. At the close of the edition of this special Perspectives 2022, the Government and social agents were still negotiating the labor reform. Asked about it and with the negotiation still open, Doménech points out that “what is known today does not invite us to think that it will be as ambitious as it would be necessary.” Even Juan Carlos Higueras goes further, who believes that “the reform of the labor market is going to remain a pure political makeup to justify that something has been done, but without an accelerating effect on employment.”
Another key reform is the pension reform that travels to the Senate after being approved by Congress with the aim of entering into force on January 1. Pensions will be revalued annually according to the consumer price index (CPI) and there will be an intergenerational equity mechanism that will temporarily raise social contributions to offset the reserve fund. In relation to ERTE and aid, extended until February 28, Emilio Ontiveros emphasizes that “they have proven to be very useful for minimize damage to businesses and families. In the absence of major international mishaps, it is reasonable for them to moderate their presence, but always very attentive and without excessive haste to withdraw ”. BBVA Research, for its part, highlights that ERTEs are already concentrated in the sectors most affected by the pandemic –tourism, hotels and restaurants– and argues that “the improvement in these sectors next spring should be enough to eliminate their use”.
Withdrawal of stimuli
One of the unknowns that will have to take off in the 2022 equation is what will happen to the emergency purchasing program in the face of the pandemic that the European Central Bank activated. The improvement in the macroeconomic outlook and the advance of vaccination have already led the regulatory body to slightly reduce the amount of debt purchases.
On the other side of the Atlantic, the Federal Reserve has already begun withdrawing monetary stimuli. “The first rise in interest rates is expected to take place in the fourth quarter of 2022, although it could be anticipated if inflation continues to surprise to the upside,” says Doménech.
“Policy makers must strike a difficult balance in continuing to support the recovery while, at the same time, prepare to act quickly if inflation expectations are far from the targets, ”says Nieves Benito. Emilio Ontiveros believes, for his part, that the ECB is going to maintain current interest rates throughout 2022. “One thing is that it gradually withdraws stimuli, purchases of assets in the secondary market, and another is that it raise its reference rates” , clarifies.
On the geopolitical board, The biggest threat comes from strained relations between the United States and China. A deterioration in the coexistence of the two great world economic powers could “inhibit capital flows and international trade and, with it, the possibilities of economic growth,” warn from International Financial Analysts. Juan Carlos Higueras recalls that “China is the world’s factory, it monopolizes the vast majority of raw materials, and if it catches a cold, the world suffers from a severe flu with headaches”