Spain | Stagnation and inflation: a challenge for public policy

Summary

Activity data reflect a negative balance for the last few months and, although inflation may have reached a turning point, this context of weak activity and rising prices poses a huge challenge for public policies.

Key points

• Key points:
• According to BBVA Research, GDP could stagnate in the third quarter of the year (-0.2% quarter-on-quarter). One example of the indicators showing sluggishness is registrations with Social Security.
• Just as important is the fact that the quarter has gone from good to bad, which is especially noticeable in the performance of services. Tourism is reported to have slowed significantly in the second half of August.
• This is why the inflection point that could occur in inflation is important. Some measures that anticipate the trend in prices are already beginning to show a decline, although it is true that they are still at relatively high levels.
• This situation of virtual stagnation and high inflation places economic policymakers in a difficult position, where social tensions could increase in the run-up to winter.
• The solutions must include preserving market signals as much as possible, generating a consensus through an income pact and focusing aid on the most vulnerable families.

Geographies

Topics

Tags