In the first unrestricted summer after the pandemic, the people who can have thrown themselves into enjoying everything within their reach. However, international organizations and economic gurus do not cease to warn about the almost imminent risks. Knowing that there is a war in Europe of unpredictable evolution, people want to live in the moment.
The economic expert Raymond Torres, director of the Situation and International Economy of the Savings Banks Foundation (Funcas), considers that at this moment “the main threat is in inflation because it hits hardest the less advantaged households”. In any economic activity, in all places, the mantra of recent months is the same: you have to be aware of the price increase. Torres warns that the priority has to be the containment of these prices, especially those of “food and energy products”.
Inflation yes, recession in doubt
In a country where the 28% of the population is at risk of poverty or social exclusion, inflation and rising prices is a threat. But while it is true that this rate has increased almost one point during the pandemic, so is the improvement of other indicators.
“There are more than 20.3 million workers affiliated with Social Security“
The population that claims to make it to the end of the month with great difficulty has decreased, but it is still 9%. The Minister of Industry, Commerce and Tourism, Reyes Maroto, recalls that we have a “security element” in reference to the fact that “there are more than 20.3 million workers affiliated with Social Security” since “we did not have this in the previous crisis, where the unemployment rate was 27%”.
All the organizations agree that we are going to a period of lower economic growth than expected and higher inflation, in line with the rest of Europe. But very few even talk about recession. In general, the world economy will continue to grow and the Spanish even more than the average for the euro zone, around 4%.
The Funcas expert points to Germany as “the country most exposed to a recession”. And he warns that if this European power entered a recession “it would inevitably have a very important impact on the Spanish economy.” Torres clarifies: “perhaps not a recession, but a sharp slowdown.”
“In no case do we foresee a recession, as no international and national organization foresees it“
Minister Maroto underlines that “in no case, indeed, do we foresee a recession, as no international or national organization foresees”. She though she appeals to the “prudent inflation management, which is the main problem we have right now.” And he assures: “we have also taken measures to contain prices”.
Recovery of tourism and employment
For now, millions of citizens have decided to ignore inflation on these holidays. Spain has already practically recovered the pre-pandemic figures in terms of the number of tourists, and improves the figures for stays and average spending. Employment has recovered even earlier.
“The sector has recovered employment very quickly“
From the Spanish Confederation of Hotels and Tourist Accommodation, CEHAT, Jorge Marichal confirms that “the sector has recovered employment very quickly”. And he attributes it, to a large extent, to the ERTEs that he describes as “a perfect mechanism to be able to talk about an economic recovery, not only in tourism, but in our country.”
In the primary sector, between May and August, from south to north, the harvesters cross Spain collecting the cereal. We found Juan Carlos Muñoz harvesting this hybrid rye crop in the province of Ávila. Like everyone else, he complains about what costs have risen.
“Right now, twice as much as last year,” explains Muñoz about the price of diesel. An increase that this professional has to affect in his work and for which he discusses with the farmers before settling on the price that he is going to charge them for each hectare harvested. In the end it will be around between 60 and 65 euros.
“Production costs have increased by 40 – 50% compared to last season“
Buenaventura González, from the UPA agricultural union in Ávila, explains that this campaign’s production costs “have increased by 40-50% compared to last season.” For the country as a whole, the cooperatives estimate that the harvest will not reach 18 million tons, 30% less than last year. The lack of rain and heat have hampered production. But sales prices have been record high. In some products they have been duplicated.
Spain already had to import cereals, especially for making feed. This year you will have to do it a little more. In principle, there are no supply problems because the market already has alternatives to Ukraine or Russia. Another thing is the price.
Perhaps the most powerful tool that Spain has to deal with the economic difficulties that are coming is that of the european recovery funds. Almost 80,000 million to invest in the coming years. “We have to use the funds to transform the country, to improve the production model that we have had up to now,” claims expert economist Raymond Torres.
The so-called PERTE of the electric car is the most important project developed so far in the “Next Generation” Plan of the European Union. It is estimated that it will mobilize 12,000 million euros, between public and private investment. 13 proposals have been submitted, involving more than 300 companies. All the large automobile companies established in Spain participate in some of these proposals.
The SEAT Volkswagen group leads one of those projects. Announces its own investment of 7,000 million. Of these, 3,000 million will be used to electrify the production line at the Martorell plant where, for now, they can only manufacture hybrids. Another 1,000 million will go to the Pamplona plant.
“The investments have been conditioned to the PERTE aid so that Spain is competitive in the European environment“
The president of SEAT SA, Wayne Griffiths, explains that their investments “have been conditional on PERTE aid so that Spain can be competitive in the European environment”. The group claims to be in a position to manufacture half a million electric cars in 2025 and sell them at a price of around 25,000 euros. But it calls for more speed from the public sector to resolve uncertainties and create recharging points.
The PERTE of the electric car
“We also need to convince Spanish society to make this change towards sustainable mobility”, claims the Minister of Industry. “12% of the cars that are being manufactured are already electrified,” says Reyes Maroto.
Griffiths, who lowers the figure to 9%, recalls that Spain is “at the bottom of Europe, at the bottom of the list” in the sale of electric cars. “The European average is 18%. Germany, for example, has 25%”, says the president of SEAT.
The PERTE of the electric car is so important because the manufacture of vehicles in Spain accounts for more than eight percent of the total wealth generated and employs two million people. But car sales are falling across Europe and the shift to electric mobility needs to be accelerated.
The largest investment will be in Valencia, for a battery factory. Three billion and forecast of three thousand jobs. The first batteries will be in 2026. The plans must extend to at least two autonomous communities and that more than half of the companies involved are small or medium.
There will be other projects with European funds. Such as microchips, the naval or the agri-food industry. But all economic agents and society as a whole insist on the importance of controlling inflation so that this summer spirit is not lost in the dark clouds of autumn.