image source, Good pictures
image source, Good pictures
A majority of citizens assess Spain’s economic situation negatively.
If a Spaniard is asked to assess his country’s economic situation, he will almost certainly give a negative assessment, even if he has some economic indicators that inspire confidence. Why this discrepancy between perception and data?
with a Rising gross domestic product (GDP) and falling inflation and unemploymentEconomic institutions and experts consulted by BBC Mundo assess the state of the Spanish economy in a generally positive manner.
However, in the latest June barometer from Spain’s Center for Sociological Research (CIS), 43.1% of citizens described the general economic situation as “bad” and 13.8% as “very bad”..
This discrepancy between vision and reality was further intensified during the election campaign General Election on 23rd July Political parties have highlighted the most convenient indicators and used the statistics to their advantage.
Pedro Sánchez, head of the government and leader of the Spanish Socialist Workers Party (PSOE), confirms this. Spanish economy “goes like a motorcycle”Alberto Núñez Feijo, leader of the conservative Popular Party (PP) and leader of the opposition, insists. “stagnant”.
Spain is gearing up for an election with the economy as one of the central issues.
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More than 37 million Spaniards have the right to vote in general elections, 2.32 million of whom live in other countries, according to the National Institute of Statistics (INE).
There are no absolute truths in economics
“Everyone sees what suits them. One says we are growing very fast and others say yes, but we fell fast (during the pandemic),” Javier Quezada, an expert at the Valencian Institute of Economic Research (IVIE), explains to BBC Mundo. “While one talks about GDP, another talks about GDP per capita. It’s part of the game.”.
“If the economy is doing well, there is no doubt that those in power would do well to renew their mandate, whoever wants to come to power must make people realize the need for change and they must believe that they are not in a good position for that,” he narrates.
“This means that public opinion is now heavily polluted by positive or negative news,” he adds, referring to the ongoing debate among key political leaders about the state of the economy.
The same opinion is shared by Marti Barrellada, professor of economics at the University of Barcelona and president of the Barcelona Institute of Economics (IEB), who explains that when understanding the negative view of the economy of the Spaniards, it is necessary to take into account “the first element that is part of the electoral battle”.
“Logically, if an alternative to the current government is to use the fact that the economic situation is worse as a substantial argument against the government, this will affect the opinion polls of Spaniards,” he told BBC Mundo.
“It is reported with interest and it is necessary to take into account the large number of indicators and periods of analysis or reference.. So, there will always be some more negative arguments using reliable data, and there will always be a positive explanation,” he points out.
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The number of unemployed fell below 2.7 million in June for the first time since 2008, according to figures from Spain’s labor ministry.
The development of the Spanish economy
In 2022, Spain recorded GDP growth of 5.5%, according to Eurostat (European Statistics Office) data, making it the seventh country in the EU with a higher increase than major European economies such as the Netherlands (4.3%), Italy (3.7%), France (3.7%) and Germany (2.8%).
Likewise, the Bank of Spain upgraded its forecast for the year and estimated that GDP will grow at a rate of 2.3%, while inflation will moderate and end at an average of 3.2% in 2023, compared to 8.4% recorded in 2022.
“In my opinion, I don’t think the state of the Spanish economy can be assessed in any other way than positively. The indicators are good from any point of view”, Parellada assesses, although he admits that there are productivity problems and lower per capita income than the European Union (EU) average.
The strength of exports, the buoyancy of employment and the easing of energy prices are some of the main reasons for the improvement in the Bank of Spain’s forecast.
“The current moment of the Spanish economy is very positive. But if we put this in a more general context in the medium term, it is also true that the Spanish economy was the last to recover from the fall in GDP during the Covid period,” observes Omar Rachedi, associate professor of the Department of Economics, Finance and Accounting at the Higher School of Business Administration and Management (Esade).
To this slow recovery we must add High Spanish public debt Due to the enormous impact of the pandemic on the economy, it once again set a new historical record, surpassing 1.54 trillion euros in May. This is one of the weak points of the Spanish economy.
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After peaking at an average of 15% in the first quarter of this year, the Bank of Spain expects purchase inflation to ease to 8% by the end of the year.
Importance of Shopping Cart
Consumer price index (CPI) inflation moderated to 1.9% in June compared to the same month last year, according to data from the National Institute of Statistics (INE), among other things, electricity or petrol bills became cheaper compared to the 2022 highs.
These figures contrast with France (5.3%) and Germany (6.8%) and are still far from the 2% target set by the European Central Bank. However, food prices continue to rise by more than 10%, weighing down the household shopping basket.
“When you go to the supermarket, you take into account a change in the price of an item that you want to buy often or that is very important to you. Your perception is that there is a general increase in inflation, however this is not true,” Racchedi explains to BBC World.
To understand why society feels things are worse than the macro indicators say, you have to look at the micro. People understand the price of petrol, the items in the shopping basket or the electricity bill, not how much GDP has grown.
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Inflation in food prices continues to go through the roof in Spain.
“Looking at the macroeconomic data, everything seems to be fine. Jobs have been created, inflation is coming down, all positive. Now, If you talk to people, they may have a different opinion”, declares Quezada for his part.
“Life has become more expensive, and food, which people perceive directly, has gone up”, he thinks. “People are seeing it more difficult to make ends meet as inflation eats up salary increases and they are lagging behind price growth.”
Inflation is one of the main fears of people and the main enemy of governments. “Macroeconomic data is very good, yes, but there is a magic word called inflation. Inflation continues to be high across Europe and it is killing governments. This is the lesson that the history of Europe gives us,” Cristina Monge, a political scientist and professor at the University of Zaragoza, explains to BBC Mundo.
“You might have great macro data, but your mortgage has gone up by 200 euros a month or you find yourself going to the supermarket and things aren’t as spread out as they used to be. So, The concept in microeconomics is not the same as in macroeconomics”, the expert points out.
Economic Narrative
The negative perception of the economy is not unique to Spain. A step Census A recent Pew Research Center report found that majorities of adults in 18 of 24 countries rated their countries’ economic conditions as “worse.”
In Spain, 72% of those surveyed rated it negativelyOnly Mexico, India, Indonesia and the Netherlands had a figure in the survey’s average that recorded a majority describing it as “good.”
“You can have concentrated growth in certain parts of the population, so not everyone can benefit from this growth,” Rachedi says. “Part of the employment data and fiscal policy, in general, makes me think the situation is not as negative as people perceive it to be.”
“This contradiction is not only in Spain. The same debate is now in the United States, where the return to employment has been registered, but people continue to report an idea that there is a recession and a crisis.
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To cushion the impact of rising electricity prices, the Spanish government last year approved an unprecedented tax cut in electricity tariffs.
According to him, this discrepancy may be part of the growth of the past 20 years, in which a segment of the population has benefited from higher incomes. But Nobel laureate Robert J. It is also part of what Shiller called the “economic story.”
“The economic narrative is an infectious story that has the potential to change the way people make economic decisions”. This theory explains how story shapes our perception of reality, and according to Rachedi, it may be happening in Spain.
“If the same story is repeated, it can have a very significant impact on the population, especially at a time when social networks are very important,” he points out.
“I think the characteristics of this recovery are partly due to the high inflationary GDP growth. For example, it’s very interesting to see the strong correlation in the U.S. between polls favoring the president and gasoline prices. Every time gasoline prices go up, you can see how support for the president goes down,” he said.
In Spain’s elections this Sunday, it may be possible to find out which of the “economic narratives” most convinces voters or the perception of many citizens that making ends meet is reason enough to change the government.
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