Spain | Who are the big losers from inflation?

Summary

The short answer is everyone. Spain is a large importer of energy goods and commodities. Rising costs for these products results in a greater outflow of funds from our economy to the rest of the world.

Key points

• Key points:
• A larger percentage of spending of low-income households goes to electricity and less on gasoline. Young people rent their homes, so they are affected by leases that are indexed to the CPI and, unlike pensioners, their purchasing power is not guaranteed, while they spend more on transportation.
• The impact by sector depends on energy use intensity, market structure or forecast growth in demand. To illustrate, processes that use a large amount of electricity per unit of output account for a large percentage of costs in industry.
• Moreover, higher transport costs lead to a loss of competitiveness, possibly affecting not only manufacturing, but also tourism.
• Small enterprises are more exposed, since they lack the tools to adapt to the new paradigm or have less bargaining power.
• The government needs to leverage the structure developed over the past few years to channel aid efficiently, so it can selectively mitigate the most harmful impact of increases in prices.

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