The Spanish economy recovered from the pandemic more quickly than the National Statistics Institute (INE) had calculated. In the last two years, the economy has grown more than the data indicated until now. This higher growth was a much-repeated hypothesis by some economists when they compared GDP growth with other indicators, such as the labor market, which has now been confirmed.
In this way, the review published yesterday by the INE means that Spain has grown by 1.3% more than calculated so far in the period 2020-2022. Specifically, it leads to a growth of 6.4% in 2021, that is to say, nine tenths more than what has been established so far; and 5.8% in 2022, three tenths more. In addition, the 2020 GDP is also modified by one tenth, although the drop remains brutal, 11.2%.
This means that Spain recovered its pre-pandemic GDP level in 2022, and not this year, as previously thought. It changes in a way the account of the behavior of the Spanish economy during this difficult period in which the consequences of the impact of covid were suffered. Spain has a huge drop in 2020, the worst of the major European economies, but its capacity to recover is greater than previously thought, as it has managed to reach GDP levels earlier than the end of 2019. Earlier, yes, but it continues achieving with more difficulties than the large economies, such as Germany, France and Italy.
Growth in 2021 and 2022 was greater than expected thanks to the boost in private consumption and external demand, which performed better than expected. 2021 highlights the upward revision of private consumption, public spending and investment, while the following year, 2022, there is more contribution from external demand and also from private consumption and public spending .
"The revision is much higher than usual, but it is logical and reasonable for the time we have gone through; during the pandemic, many partial indicators have become distorted and have started to send noise. As the situation normalizes, they will be more precise", says Manuel Hidalgo, professor at Pablo de Olavide University. It also highlights how the correction is much higher with regard to 2021, minus 2022, and that it is expected that this year will already be squared more accurately.
For the Ministry of Economy, the data "also reflect the quality of the growth of the Spanish economy" and add that this dynamism is maintained in a differential way during 2023, which will allow "Spain to be the country of the great economies of the euro zone that has greater economic growth". At this point, the Ministry of Economy is based on the latest forecasts of the European Commission, which place this year Spain in a growth of 2.2%, well above the European Union, which will remain at 0 .8% very weak.
From Economy they also emphasize that since nominal GDP is now higher, it leads to a reduction in the percentage of public debt over GDP. In particular, the increase of more than 20,000 million euros in nominal GDP allows the debt/GDP ratio to be reduced by an additional 1.6 points at the end of 2022, which would allow the reduction below 110% to be brought forward to 2023.
These types of revisions that the INE made yesterday are common, they always take place in September once more data is available and these data are more reliable on the growth of previous years. The difference is that, this time, due to the pandemic effect, the variation is much higher than usual.
The first warning that there could be a major correction of Spain's GDP in 2022 came on September 1st with the one carried out by the United Kingdom, of almost two points up in 2021, which went from a down 1.2% to 0.6% growth. It was a figure that raised expectations about the exercise carried out yesterday by the INE, usual every September, in which, with more complete data, the provisional calculations carried out in March are reviewed. Revisions are common, although corrections are usually small.
In the current context, the difficulty of the statistical models commonly used to accurately calibrate the reality after the pandemic also influences it. We can also add the impact of the war in Ukraine and the tax changes carried out to explain a deeper review than usual.
In September of last year, the INE also corrected the growth data of previous years and increased those of 2021 by four tenths, up to 5.5%, but on the other hand, it worsened those of 2020, up to 11.3%.