We have recent data from the INE (National Statistics Institute), which reveals that the economy of Spain only grew by 0.1% during the 3rd quarter. During the last quarter, the GDP growth was 2.0% which suggests that the Spanish GDP growth has indeed slowed down.
According to analysts, the poor results of this quarter due to weak domestic demand. However, this was compensated by robust tourism and solid experts in the country. In fact, this particular sector of Spain has recovered and is at the same levels as it was before the pandemic.
In addition, good employment data was also a positive for Spain's GDP. According to many, this was a pleasant surprise as a slowdown in the economy usually leads to massive job losses in Spain.
High Inflation Is Dragging Spanish Economy
For most of 2022, Spain struggled with high inflation as it was averaging around 8.% for the year. The major cause behind such a high inflation print was the Russia & Ukraine war. As a result of this geopolitical development, the growth rate reduced from 1.7% to only 0.1%!
But that's not the only trouble that is making the market participants nervous. The forecast from the IMF and the Bank of Spain has failed to include a winter recession.
For the next year (2023), the Spanish government has set a growth target of 2.1%. However, the earlier target was only 1.3% and was set by the Bank of Spain. This development tells us that the Spanish government is indeed bullish and believes that its economic output will improve at a much faster pace.
But let's not forget that recession is a possibility and is still on the cards. With countries like the USA falling victim to recession in 2023 (highly likely), there is no chance that Spain would be able to avoid that.
In addition, the policies set by the European Central Bank could also slow down the economic activity in the European region at large.