The Spanish economy is accelerating ‘like a motorcycle’, according to Prime Minister Pedro Sanchez.
The Spanish economy is expanding steadily and inflation has been brought under control, but Prime Minister Pedro Sanchez faces an uphill challenge to be re-elected in a snap election next weekend.
The premier and his ministers routinely cite statistics highlighting Spain’s robust economic performance, but the governing Socialists still suffered a crushing defeat in regional and local elections on May 28.
In response, Sanchez called for an early general election on July 23. According to surveys, the primary opposition conservative Popular Party (PP) will likely prevail.
Omar Rachedi, an economics professor at Esade Business School, described the situation as “paradoxical” due to the fact that “the Spanish economy is doing pretty well” in comparison to other major European nations such as Germany.
The pandemic wreaked havoc on Spain’s economy, causing its GDP to fall by 11.3% in 2020 as Covid-19 travel restrictions decimated its important tourism sector.
However, it has since recovered, expanding by 5.5% in both 2021 and 2022.
Despite the economic headwinds caused by Russia’s invasion of Ukraine, the Bank of Spain predicts the economy will grow by 2,3 percent this year, a higher rate than in most other European Union countries.
“Spain is weathering the complex international scenario much better than the rest of Europe,” said Economy Minister Nadia Calvino at the end of June.
She attributes the economic performance over the last five years to reforms implemented by Sanchez’s administration.
The government has raised the minimum wage, which was one of the lowest in the EU, by approximately 50 percent since taking office in 2018.
It has also spent nearly 50 billion euros ($56 billion) on measures to assist those struggling with skyrocketing prices, such as free commuter rail travel and the elimination of value-added tax on essential food items.
Together with a cap on the price of gas used for electricity production, these measures have made Spain one of only a handful of European nations to achieve an inflation rate below the European Central Bank’s 2.0 percent objective for this year.
The Spanish economy was among the last in the eurozone to recover to pre-crisis levels.
AFP is the source of this image, which was captured by CRISTINA QUICLER/AFP/File.
The annual inflation rate in Spain slowed to 1.9 percent in June, down from 10.8 percent in July 2022, the highest level since 1985.
This contrasts with an inflation rate of 5.5% for the entire 20-nation eurozone.
Sanchez stated that the Spanish economy was accelerating “like a motorcycle” and cited the creation of 426,000 employees in the first quarter, primarily in the tourism sector.
“Not acceptable for us”
However, according to Rachedi, Spain’s economy was one of the last in the eurozone to return to its pre-crisis levels, and not everyone has benefited from the country’s economic development.
While inflation as a whole has moderated, food prices increased by more than 10 percent in June compared to the same month last year.
As a result of rising interest rates, rent, and mortgage payments have increased, placing pressure on households.
The Bank of Spain estimates that 17 percent of Spanish households, or 1.6 million individuals, cannot cover basic expenses.
This is 300,000 more households than before the February 2022 invasion of Ukraine by Russia fueled inflation.
“Reaching the end of the month is becoming more and more difficult,” a 55-year-old housewife told AFP at the Almudena food market in eastern Madrid.
She added, “When you go grocery shopping, you do not notice” the decline in inflation.
Rafael Vazquez, a 31-year-old fruit and vegetable vendor, concurred, stating that he labored to make ends meet on a monthly income of approximately 1,000 euros.
“Salaries are very low,” he stated.
The economy may be progressing “like a motorcycle” for the government, but “not for us,” he continued.
Credit: AFP
