Spain’s economy is growing steadily and inflation has been contained – but Prime Minister Pedro Sanchez faces an uphill battle to be re-elected in a snap general election next weekend.
The prime minister and his ministers regularly present statistics highlighting Spain’s strong economic performance, yet the ruling Socialists suffered defeat in regional and local elections on May 28.
In response, Sanchez called snap general elections for July 23. Polls suggest the main opposition party, the conservative People’s Party (PP), will be the likely winner.
The situation is “paradoxical” because “the Spanish economy is doing pretty well,” especially compared to other big European countries like Germany, said Omar Rachedi, an economics professor at Esade Business School.
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Spain’s economy has been hit hard by the pandemic. GDP fell by 11.3 percent in 2020 as Covid-19 travel restrictions hit the key tourism sector hard.
But it has since bounced back, growing 5.5 percent in both 2021 and 2022.
The Bank of Spain forecasts the economy will grow 2.3 percent this year, a faster rate than most other European Union countries, despite economic headwinds from Russia’s invasion of Ukraine.
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“Spain is weathering the complex international scenario much better than the rest of Europe,” said Economics Minister Nadia Calvino at the end of June.
She attributes the reforms implemented by the Sánchez government over the past five years to economic performance.
Since taking office in 2018, the government has raised the minimum wage – which was among the lowest in the EU – by around 50 percent.
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In addition, nearly 50 billion euros ($56 billion) was spent on measures to help those struggling with soaring prices, including free commuter trains and the elimination of VAT on basic groceries.
The measures, combined with a cap on the price of gas for power generation, have made Spain one of the few European countries to bring inflation below the European Central Bank’s target of 2.0 percent this year.
Spain’s annual inflation rate slowed to 1.9 percent in June, below a peak of 10.8 percent in July 2022, the highest since 1985.
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In comparison, inflation in the entire 20-country euro zone is 5.5 percent.
Sanchez said the Spanish economy had progressed “like a motorcycle”, noting that 426,000 jobs were added in the first quarter, mainly in the tourism sector.
However, Rachedi said Spain’s economy was one of the last in the eurozone to return to pre-pandemic levels and the benefits of the country’s economic growth have not been felt by everyone.
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While headline inflation has slowed, food prices rose more than 10 percent in June compared to the same month last year.
Rents have also skyrocketed, as have mortgages due to rising interest rates, putting pressure on households.
The Bank of Spain estimates that 17 percent of Spanish households – 1.6 million – are unable to meet essential expenses.
That’s 300,000 more households than before Russia’s invasion of Ukraine in February 2022, which fueled inflation.
“Reaching the end of the month is getting harder and harder,” Maria Dolores Carretero, a 55-year-old housewife, told AFP at the Almudena food market in east Madrid.
“When you shop for groceries, you don’t see the slowdown in inflation,” she added.
Rafael Vazquez, a 31-year-old fruit and vegetable salesman, agreed, saying he was struggling to make ends meet on a monthly salary of around €1,000.
“Salaries are very low,” he said.
The economy may progress “like a motorcycle” for the government, but not for us, he added.
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