Spain economy grows by 5% in 2021

MADRID — Spain's economy grew by 5 per cent in 2021, showing a bounceback from a year earlier, but that was below the government's target, an initial estimate by the National Statistics Institute (INE) showed on Friday. 

The government had expected gross domestic product to rise by 6.5 per cent in 2021 after a year in which it contracted by nearly 11 per cent in one of the worst results of the eurozone. 

Such a forecast was considered unrealistic by economists. 

However, the INE estimate outdid the expectations of the Bank of Spain and the OECD, which were both estimating growth of 4.5 per cent. 

It also exceeded the expectations of the International Monetary Fund which had expected the economy to grow by 4.6 per cent. 

The INE figures showed the economy grew by 2 per cent in the last quarter, largely resisting the emergence of the Omicron variant and supply problems that affected production. 

It had reached 2.6 per cent in the previous quarter. 

Fourth-quarter growth was also achieved despite sluggish consumption, which fell by 1.2 per cent. 

In recent months, Spanish household spending has suffered from soaring inflation, which reached a 30-year high of 6.5 per cent in December due to surging energy prices. 

According to "Funcas think tank", inflation is expected to slow slightly in 2022 but remain at a high of around 3.5 per cent, while growth should accelerate to 5.6 per cent, allowing for the losses of 2020 to be finally reversed. 

The Spanish government is predicting growth levels of 7 per cent this year, well above the expectations of the main economic bodies. 

It had initially pledged a return to pre-pandemic growth by the end of 2021. 

But this is unlikely to happen until early 2023, according to the European Commission. 

Despite growth being lower than his government's forecasts, Socialist Prime Minister Pedro Sanchez said in he was "satisfied with the smooth running of the economy".

In a statement, he added that "the 140 billion euros in European Union pandmeic recovery funds which Spain will receive by 2026 are a historic opportunity to reindustrialise, modernise and advance".