The declaration of the state of alarm in Spain two years ago to try to stop the first blow of Covid-19 opened the door to an atypical and uncertain scenario that has completely disrupted the country’s economy. The pandemic, the supply crisis linked to the subsequent recovery in activity and consumption, and the start of the first war in decades on European soil have left a panorama of unpredictable consequences, in which only employment seems to have returned to normal levels. of 2019.
Meanwhile, a soaring inflation with no sign of moderating in the short term threatens to continue postponing the return of GDP to pre-pandemic levels, already delayed: before the war in Ukraine, there were still about four percentage points to leave behind the dark period of Covid. Public finances, unbalanced by the effects of the health crisis, for their part look to the east, pending the war and the escalation of prices.
The year 2019 ended with 19.96 million employed in Spain, a figure that still lacked one million workers to reach the country’s maximum employment, which was recorded in the third quarter of 2007, before the financial crisis , when 20.75 million people with work were counted. In this situation, without having yet recovered the level of occupation prior to the 2008 crisis, an overwhelming confinement of the Spanish population arrived unexpectedly on March 14, 2020, which would last until June 21.
Those almost 100 days with the economy in a state of hibernation took away a million jobs, the vast majority temporary, -the minimum occupation was registered in mid-2020, with 18.6 million workers- and put on hold until 3.5 million jobs that benefited from temporary employment regulation files, the now famous ERTE, which prevented the destruction from reaching the levels reached in the 2008 crisis (3.8 million jobs destroyed) and that therefore they had not yet recovered.
Thus, the effect of the ERTE has led to a rapid recovery in the level of employment. According to the latest published data from the Active Population Survey (EPA), Spain would currently exceed 20.2 million employed persons, approaching one million more employed persons than before the pandemic. The number of unemployed (3.10 million at the end of 2021, according to the EPA) is also lower than the quarter before confinement, when there were 3.19 million unemployed in Spain.
However, this recovery in employment has its fine print because the improvements in employment have not been equally distributed between the public and private sectors. Despite the fact that most of the new employment has been generated in private companies, this has not been enough to exceed the volume of employment they had before the end of 2019. Thus, at the end of 2021 there were still 94,100 jobs to recover in the sector private to match the pre-covid templates, something that will surely be exceeded in the first quarter of 2022.
However, in the private sector the recovery has been more lucid since it currently has more than 222,000 more employed people than two years ago.
In addition, the number of hours worked has not recovered with the same intensity as employment. At the end of 2009, the number of effective weekly hours of all employed persons was 3.6% below the current figure and at the start of 2021 at a similar level. This has meant that with more employment, production has not grown in the same way and, therefore, the GDP still has more than four percentage points to recover and reach its pre-crisis level.
With employment evolving favorably, today’s eyes are on inflation, one of the indicators that generates the most uncertainty about the recovery because it is almost entirely linked to a war that threatens to disrupt the geopolitical relations of half the world in the long term.
The CPI closed the year 2019 around 0.7%, a residual advance that culminated in 2020 with notable falls close to one percentage point. In March, just when the state of alarm was declared, the advance in inflation was in fact flat. In 2021, however, prices began to rebound from June, finding one of the main causes of the advance in supply chain bottlenecks and the lack of global supplies. Prices went from 2.9% annually in July to 6.5% in December, to climb in January and February 2022 to 6.1% and 7.6%, a figure not seen in decades.
As the origin of this unprecedented escalation is found in fuel and energy prices, intrinsically linked to the war in Ukraine, leading analysts expect the CPI to continue to rise for most of 2022, closing the average for the year by above even 5%. Last week, Funcas estimated that the indicator would reach 8.4% in the month of March.
Waiting for the evolution of the armed conflict in the east, the main fear of analysts is that the feared second-round effects, by which the rises in fuel and energy are transferred to the rest of the products in the basket of buy, keep pressing. This phenomenon, which would generate consequences for employment and economic recovery –with its corresponding effects on the health of the State’s public finances– could awaken the specter of stagflation.
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Tax rules. Public finances, still far from recovering pre-pandemic levels, are also pending the development of the war and its consequences. One of the most immediate could be the freezing throughout 2023, one more year after 2020, 2021 and 2022, of the fiscal rules. Public debt, which had been moderating before the outbreak of the pandemic with rates close to 97% of GDP, shot up to 120% in 2020 and would have closed 2021 at around 120.4%. Leading analysts, before the Russian invasion of Ukraine, estimated that it would stagnate at around 115% of GDP for the next four years. The deficit, below 3% in the years before Covid, shot up to 11% in 2020 and is expected to have closed 2021 at around 7.5%. Again, the projections place it around 4% in the next five years.