 209

Spain
Activity is projected to grow by 1.3% in 2023 and 1.7% in 2024, after increasing by 4.7% in 2022. High
inflation will curb household purchasing power, but savings accumulated during the pandemic will support
consumption. With deteriorating demand prospects and rising financing costs, private investment is
expected to remain subdued. The slowdown in key trading partners will dent exports. Inflation will peak at
8.6% in 2022 and then decline to 4.8% in 2023 and 2024.

Fiscal measures aimed at sheltering households and firms from the rise in energy prices will need to be
reviewed periodically to ensure they are warranted, targeted towards the most exposed and compatible with
fiscal and environmental policy targets. A timely and effective use of Next Generation EU funds will be key
to support investment, boost long-term productivity and achieve the green transition.

Signs of a slowdown are accumulating

Economic growth slowed in the third quarter of 2022, with GDP rising by 0.2% after 1.5% in the second
quarter. Consumer confidence fell to very low levels, close to those reached in the beginning of the
pandemic. The unemployment rate rose to 12.7% in the third quarter after 12.5% in the second. Although
it receded from a peak at 10.7% in July 2022, inflation remains high, standing at 7.3% in October, and core
inflation reached 4.8% in September. The wage rate increased by 3.3% between the third quarter of 2021
and the same quarter of 2022. The government has agreed to raise the salary of public workers by a total
of at least 8% and up to 9.5% (depending on the evolution of inflation and GDP) cumulated over 2022,
2023 and 2024.

Spain

Source: Instituto Nacional de Estadistíca; Eurostat; and OECD Economic Outlook 112 database.

StatLink 2 https://stat.link/z2drj9

OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022
210 

Spain: Demand, output and prices

2019 2020 2021 2022 2023 2024

Current prices Percentage changes, volume

EUR billion (2015 prices)
Spain

GDP at market prices 1 245.5 -11.3 5.5 4.7 1.3 1.7

Private consumption 714.5 -12.2 6.0 2.0 1.3 1.4
Government consumption 234.9 3.5 2.9 -1.8 0.9 0.7
Gross fixed capital formation 249.5 -9.7 0.9 5.4 2.3 3.7
Final domestic demand 1 199.0 -8.7 4.2 1.9 1.4 1.7
Stockbuilding¹ 9.9 -0.8 1.0 -0.2 0.0 0.0
Total domestic demand 1 208.9 -9.4 5.3 1.6 1.4 1.7
Exports of goods and services 434.8 -19.9 14.4 18.1 3.5 3.2
Imports of goods and services 398.2 -14.9 13.9 9.7 4.2 3.4
Net exports¹ 36.6 -2.2 0.3 3.1 -0.2 0.0
Memorandum items
GDP deflator _ 1.2 2.3 3.0 3.8 4.5
Harmonised index of consumer prices _ -0.3 3.0 8.6 4.8 4.8
Harmonised index of core inflation² _ 0.5 0.6 4.0 4.8 3.7
Unemployment rate (% of labour force) _ 15.5 14.8 12.9 12.9 12.7
Household saving ratio, net (% of disposable income) _ 10.8 7.0 4.2 4.2 2.3
General government financial balance (% of GDP) _ -10.1 -6.9 -4.9 -4.2 -3.7
General government gross debt (% of GDP) _ 148.2 142.7 140.3 139.7 137.6
General government debt, Maastricht definition³ (% of GDP) _ 120.4 118.3 115.9 115.2 113.1
Current account balance (% of GDP) _ 0.6 1.0 0.7 0.6 0.4
1. Contributions to changes in real GDP, actual amount in the first column.
2. Harmonised index of consumer prices excluding food, energy, alcohol and tobacco.
3. The Maastricht definition of general government debt includes only loans, debt securities, and currency and deposits, with debt at
face value rather than market value.
Source: OECD Economic Outlook 112 database.

StatLink 2 https://stat.link/7c543l

The government has implemented two successive sets of fiscal measures to attenuate the impact of the
rise in prices. The first one, effective from April to June 2022, and estimated to cost EUR 6 billion (0.5% of
annual GDP), included tax rebates and direct aid to firms and households, notably a rebate on motor fuels.
The second one, covering the second half of 2022, amounts to around EUR 9 billion (0.7% of GDP), of
which EUR 5.5 billion are spending measures and EUR 3.6 billion are tax cuts (extending those in the first
package and a new cut in the VAT rate on electricity from 10% to 5%). Furthermore, in June, the European
Commission approved public aid worth EUR 6.3 billion, effective until May 2023, in direct grants to
electricity producers (the so-called “Iberian exception”). Finally, the VAT rate on gas was reduced from
21% to 5% from October until December 2022 and the government announced in October new measures
worth EUR 3 billion, including regulated gas prices for collective residential heating systems until the end
of 2023, and new subsidies on low-income households’ heating and electricity bills.

Fiscal support will be adjusted

The general government deficit is expected to decline to 4.2% of GDP in 2023 and 3.7% in 2024, after
4.9% in 2022. The draft budget for 2023 features a 10.5% rise in social spending and a 25% rise in defence
spending. Pensions will be raised by around 8.5%. New tax measures, targeting firms and higher-income
households, are expected to increase tax collection by EUR 3.1 billion cumulated over 2023 and 2024. No
new measure to cushion the impact of Russia’s war of aggression against Ukraine was included in the
draft budget but the current support measures will be assessed at the end of the year. In the projections,

OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022
  211

it is assumed that direct aid will not be renewed in 2023 and that tax rebates will be maintained in 2023
and gradually removed in January and July 2024. Under these assumptions, the fiscal stance would be
tightened by 1.2% of GDP in 2023 and 0.5% in 2024.

Growth will slow

Growth is expected to slow in 2023 and remain moderate in 2024, mainly due to the depressing effect of
inflation on household purchasing power and weaker in foreign demand prospects. The rise in euro area
interest rates will weigh on business investment, while public investment is expected to remain dynamic
thanks to the support from Next Generation EU funds. Increasing interest rates will also hamper
consumption and housing investment, although the impact is expected to be more moderate than in
previous periods of rising rates, as the share of floating-rate housing loans has fallen considerably over
the last decade, to around 25%. Under the assumption of a stabilisation in energy import prices, inflation
would recede in the course of 2023, but remain high. The main risks surrounding the projection are related
to the impact on activity from the EU plans to lower energy consumption and to the evolution of the war in
Ukraine, although Spain is likely to be less affected than a majority of the EU countries by gas shortages,
as it is less dependent on Russian gas imports. A swifter use of European funds would hasten the recovery.

Measures to cushion inflation should not jeopardise the green transition

An agreement with social partners to share the burden of the rise in import prices will mitigate the risk of a
wage-price spiral. Fiscal measures to alleviate this burden must be temporary, targeted towards those
most in need, be balanced with the necessary medium-term fiscal consolidation, and maintain incentives
for energy savings. The latter will require the introduction of an efficient regulatory framework and adequate
incentives to foster private investment in green technologies.

OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022