Publications

• The Quarterly report on the Spanish economy analyses recent developments in the economy, within the international and euro area context, and also certain economic topics considered to be relevant. It includes an editorial summarising the essential content of the report, and an update of the macroeconomic projections for the Spanish economy.

Motivación

La Encuesta del Banco de España sobre la Actividad Empresarial permite extraer, en tiempo real, información muy valiosa acerca de la facturación, el empleo y los precios pagados y cobrados por una muestra amplia de empresas españolas, lo que supone una contribución muy relevante al diagnóstico de la situación coyuntural de la economía.

Ideas principales

• Las empresas perciben un ligero deterioro de su facturación en el primer trimestre de 2023, tras la caída de los dos trimestres anteriores, aunque las perspectivas para el siguiente son positivas. El empleo, por su parte, se habría mantenido en niveles similares a los del cuarto trimestre del año pasado.
• Se percibe una continuación de la moderación de las presiones de los costes de producción, aunque los precios de venta repuntaron en el primer trimestre. Las expectativas, tanto a corto como a medio plazo, indicarían menores aumentos de costes y precios de venta; en cambio, aumentan ligeramente las expectativas de costes laborales a un año.
• El impacto negativo sobre la actividad de las empresas de los problemas de suministro disminuye significativamente, al tiempo que se frena el deterioro de las condiciones de demanda; por el contrario, tienden a acrecentarse los problemas asociados a la falta de disponibilidad de mano de obra.

Motivación

En el último año se ha observado un aumento de la demanda de servicios sanitarios, cuyas causas y grado de persistencia son todavía inciertos. Si dichas dinámicas se prologaran en el tiempo y estuvieran relacionadas con un deterioro persistente en la salud general de la población española, su impacto económico podría ser significativo.

Ideas principales

• Las últimas olas del barómetro sanitario del Centro de Investigaciones Sociológicas muestran un incremento de la demanda de servicios sanitarios en nuestro país. También se ha observado un aumento en los ocupados que pierden días de trabajo por enfermedad, incapacidad temporal o accidente.
• Existe una considerable incertidumbre en cuanto a las causas y al posible grado de persistencia de estos desarrollos, algunos de los cuales parecen estar en línea con las predicciones de la literatura que estudia las secuelas del COVID-19 sobre una población ampliamente vacunada que resulta infectada.
• En la medida en que estos desarrollos puedan resultar duraderos y estar asociados a un deterioro persistente en la salud general de la población española, podrían requerir un aumento estructural del gasto sanitario —aún difícil de cuantificar— y afectar negativamente —aunque con elevada incertidumbre— al producto potencial.

Rationale
This article analyses what impact the increase in permanent contracts observed over the course of 2022 might have had on household spending.

Takeaways

• In 2019, workers on permanent contracts devoted 81% (on average) of their household income to spending, compared with 72% for those on temporary contracts.
• In the past, having their temporary contract converted to a permanent one has prompted households to increase their spending-to-income ratio by approximately 20% over the following two quarters.
• Based on those figures, the conversion of temporary to permanent contracts observed in 2022 could have increased the spending-to-income ratio by between 0.18 and 0.24 percentage points.

Rationale

The recent shocks to the Spanish economy, linked to both COVID-19 and rising energy prices, have had an uneven impact across sectors of activity, underscoring the importance of monitoring the supply side of economic activity.

Takeaways

• This article presents a model for forecasting quarterly GDP using a combination of monthly indicators to estimate the growth of gross value added for each sector of activity.
• The results in terms of forecasting accuracy evidence the usefulness of a sectoral approach, as a complementary tool for monitoring economic activity in the short term.

Rationale

Economic convergence measured by income per capita refers to the process whereby lower income regions post higher growth, so that over time cross-regional differences diminish. This process was quite intense in Spain from 1980 to 2008 when, coinciding with the onset of the financial crisis, it came to a halt. Accordingly, it is of interest to document this phenomenon and investigate its possible causes.

Takeaways

• Economic convergence between the Spanish regions was intense from 1980 to 2008, when it came to a halt following the outbreak of the financial crisis.
• Labour productivity, largely driven by capital accumulation, was the main determinant of the convergence process between 1980 and 2008. It is also the main contributor to its subsequent stagnation.
• However, in the most recent period, population ageing, which is especially pronounced in regions with higher income per capita, has helped to narrow the differences, albeit not sufficiently to offset the impact of the other factors.

Rationale

Following the COVID-19 pandemic, tax revenue has shown strong dynamism, increasing as a proportion of GDP by 3.7 percentage points since 2019. Understanding the nature of this dynamism is key to assessing Spanish fiscal policy.

Takeaways

• This article breaks down revenue growth into four explanatory factors: real economic activity, price growth, the effect of fiscal measures and an unexplained component or tax residual.
• The effect of prices (inflation) has been gaining weight and appears to account for somewhat more than half of the revenue growth observed in 2022, especially from VAT and personal income tax.
• It is estimated that 2.6 percentage points of the 3.7 percentage point increase in the revenue-to-GDP ratio cannot be explained by the changes in economic activity, prices or the fiscal measures approved. In the absence of an explanation about the permanent or temporary nature of this phenomenon, the principle of prudence would advise against considering this increase in revenue to be permanent.

Rationale

A variety of policy measures have been put in place in recent months to support households and firms through the upswing in prices. Analysing the design of these measures, as well as their distributional and budgetary impact, is crucial in any economic context, but even more so at the current juncture, characterised by the presence of fiscal imbalances.

Takeaways

• Most of the fiscal measures recently implemented in Spain to tackle the energy crisis and surging prices are largely non-targeted measures, rather than measures targeted at the most vulnerable households and firms.
• According to calculations, the reductions in VAT on basic foodstuffs and on electricity and gas resulted in greater savings for low-income households as a percentage of their total expenditure, while the fuel subsidy may have benefited high-income households relatively more.
• Alternative measures targeting vulnerable households based on their income could provide protection at a level that is comparable to the actual measures but at a lower cost and without distorting price signals.

Rationale

Changes in working hours are one of the factors that determine the contribution of labour to an economy’s growth. It is therefore worth assessing whether the moderate downward trend observed in this variable over the last four decades is likely to persist.

Takeaways

• The fall in average working hours in Spain between 1987 and 2019 (from 37 to 31.8 hours per week) reflects a range of structural changes in the economy over that period, such as the increase in the weight of the services sector and the rise in part-time work.
• The pandemic accelerated the decline in average working hours, although the most recent data point to a recovery. Nonetheless, overall, the working week is now just over one hour shorter than before the health crisis. The sectors most affected were the contact-intensive ones. Working hours in trade still fall some way short of their historical trend.
• Looking ahead, factors such as demographic ageing, the increasing weight of the services sector and the rise in the part-time employment rate suggest that the downward trend in hours worked per worker could continue.

Rationale

A geopolitical fragmentation of world trade, i.e. the emergence of two blocs that restrict trade with countries in the other bloc, has recently become a more likely prospect. How does this geopolitical risk affect the trade and economic outlook for Latin America and the Caribbean?

Takeaways

• Countries in Latin America and the Caribbean differ in terms of both their trade openness and the geographical structure of their trade.

• They are therefore heterogeneously exposed to the risk of geopolitically fragmented trade.

• We quantify each country’s exposure and analyse how Latin America can harness greater trade integration with the European Union to reduce the costs of a potential fragmentation of world trade.

Rationale

The Recovery, Transformation and Resilience Plan (RTRP), linked to Next Generation EU, details an investment programme that represents a unique opportunity to facilitate the structural transformation of the Spanish economy, on account of both the plan’s envelope (around €69.5 billion or 5.6% of GDP in 2019) and its emphasis on the challenges posed by digitalisation and the green transition. A sectoral classification of how those investments are allocated is therefore interesting in order to quantify their macroeconomic impact, taking into account the interplay between the different sectors of activity.

Takeaways

• According to the findings, fully absorbing the RTRP funds would have a direct impact on GDP of 1.15% in annual average terms over a five-year horizon, although this figure could rise to 1.75% when considering spillover effects between sectors. 
• The estimated effects are heterogeneous across sectors; the sectors benefiting the most are those linked to the digitalisation process (information and communication, and professional and technical services) and the construction sector, owing to investment in public infrastructures related to the green transition. 
• However, rigidities in the reallocation of resources between sectors of activity could limit the macroeconomic effect of the investments envisaged in the RTRP. These factors could reduce the estimated impact from 1.75% to 1.3% of GDP.

Rationale
This article summarises the main results of the Bank Lending Survey for 2022 Q4 and the expectations for 2023 Q1. It also analyses matters related to funding market access and the impact of other factors on responding banks’ lending policy.

Takeaways

• According to the Bank Lending Survey, in 2022 Q4 credit standards tightened across the board in Spainfor the third consecutive quarter.
• Loan demand fell in the two household segments (house purchase and consumer credit and otherlending), while demand from enterprises grew slightly, driven by their greater financing needs for workingcapital and inventories.
• For 2023 Q1, banks once again expect loan supply to contract and loan demand to fall across theboard.

Rationale

To analyse, owing to their macroeconomic implications, the conditions and volume of funding raised by households and firms and to quantify the credit risk taken on by deposit institutions via loans to these two sectors.

Takeaways

• Financing conditions continued to tighten in the second half of 2022 and the transmission of market rate rises to the cost of lending accelerated. This has led to a decrease in the flow of new funding.
• The bank loan stock to the resident private sector in 2022 Q3 saw a slight decrease compared with the same quarter in recent years, mainly owing to trends in the stock of loans to business activities. Non-performing and Stage 2 loans continued to decline, except in some portfolios, such as those with ICO-backed loans.
• Exposures to the energy sector have a limited weight in the bank credit business in Spain, although their quality has worsened throughout 2022 and somewhat tighter credit standards have been observed.

Rationale

There is significant disparity in the pension expenditure-to-GDP ratio across European countries. This article examines the size of the Spanish pension system relative to those of other EU countries and analyses the drivers behind the differences observed.

Takeaways

• In 2019, pension expenditure in Spain, relative to the size of its economy, was above the EU’s simple average and similar to the GDP-weighted average.
• In comparison with the EU in 2019, the ageing process was less advanced in Spain and pension scheme coverage was lower. In contrast, Spain had a lower employment rate and a higher level of benefits relative to the average wage.
• Demographic projections suggest that pension expenditure in Spain will increase significantly. Slightly more than 40% of this increase could be offset if Spain’s employment rate were to rise to equal that of Germany.

Rationale

International tourism indicators in Spain are consolidating their recovery towards pre-pandemic levels, after virtually all restrictions on international travel were lifted. Against this background, the changes observed in tourists’ country of origin and travel behaviour should be analysed.

Takeaways

• Tourist flows are yet to fully recover 2019 levels, essentially due to the continued weakness in long-haul tourism, particularly from Asia.
• However, tourism receipts have already reached pre-crisis levels, driven in part by Spain attractingmore visitors with greater spending power, as borne out by the rising proportion of higher quality hotelaccommodation.
• The expectations for the next three months are somewhat cautious due to the uncertainty promptedby the deteriorating economic outlook and the upsurge in inflation. In the long-term, internationaltourism flows will be shaped by the sector’s capacity to continue improving the quality of its tourismoffering.

Rationale

Turkey is identified annually as a material country for the Spanish and euro area banking systems. Moreover, Turkey and Spain are linked by major trade and financial flows. It is therefore important to monitor the country’s macro-financial situation and main weaknesses.

Takeaways

• The Turkish economy continued to post very high inflation rates at end-2022, while economic activity began to slow in Q3, following its strong previous momentum. All of this in the context of sizeable external financing needs, foreign currency debt and low international reserves.
• Fiscal policy performed better than expected, and the country’s accounts remain healthy. In terms of monetary policy, in August the Turkish central bank resumed the process of reducing the policy interest rate initiated a year earlier, with the real interest rate standing at -75.5% in November.
• Nonetheless, macroprudential and regulatory measures were implemented to keep credit growth in check and encourage only lending to certain productive sectors. Meanwhile, the banking sector’s balance sheets remain relatively healthy, although some indicators have worsened.

Rationale
In recent years the Spanish business sector has experienced unprecedented shocks: the onset of the pandemic, supply chain bottlenecks and escalating commodity prices. In this setting, it is important to assess the sector’s economic and financial situation.

Takeaways

• Between April and September 2022, the recovery in activity recorded in the previous two six-month periods continued for Spanish SMEs. However, higher production costs meant that profits declined at the majority of the firms surveyed.
• For the first time since 2013, the survey signals a deterioration in the availability of bank financing.
• In any event, despite rising slightly, the indicator of obstacles to obtaining bank loans remains at historically low levels.

Rationale

The 2015 Paris Agreement is a milestone in the global fight against climate change. Against this backdrop, and as a result of credit institutions’ alignment with the agreement, it is important to analyse its impact on lending to firms.

Takeaways

• The 2015 Paris Agreement represents one of the first initiatives intended to foster the transition to a greener economy and, consequently, to reduce carbon dioxide (CO2) emissions.
• The findings of this article show that lending by Spanish credit institutions to more polluting firms appears to have declined somewhat between 2014 and 2019.
• The evidence presented also suggests that, during that period, the banks most exposed to climate risk reduced their supply of credit to firms operating in more polluting sectors in order to mitigate this risk. However, in quantitative terms, the effects are moderate.

Rationale
As a result of the pandemic and with the aim of adapting to a constantly changing environment, the European Semester has been immersed in an important restructuring process since 2020. The launch of the Recovery and Resilience Facility (RRF), a central element of the Next Generation EU (NGEU) temporary instrument, has made it necessary to adapt the European Semester to avoid overlaps and eliminate unnecessary administrative burdens.

Takeaways

• For the 2022 cycle, the European Semester preserves its main purpose of broad economic and employment policy coordination, while taking into account the implementation requirements of the RRF.
• One of the key developments this year is the reintroduction of country reports and country-specific recommendations. A new recommendation included aims to reduce dependence on fossil fuels, in line with the REPowerEU objectives.
• In the case of Spain, the recommendations are to: (i) ensure a prudent fiscal policy, (ii) continue implementing the Recovery, Transformation and Resilience Plan, (iii) increase recycling rates, and (iv) reduce dependence on fossil fuels.

Rationale

The current period of high inflation makes it difficult for investors to maintain their profitability targets in real terms. Against this background, it is important to analyse the returns on different types of assets recorded in this and past inflationary episodes.

Takeaways

• In the past, both commodities and inflation-linked bonds have generated positive real returns duringinflationary periods, while conventional sovereign bonds and general stock market indices haveyielded negative real returns.
 
• In the current inflationary episode energy-related assets have generated the highest returns, while inthe United States residential real estate has also performed well.
 
• In the recent period, both in the euro area and the United States investors have increased their holdingsin investment funds specialising in inflation-linked bonds, and have reduced their holdings inconventional bond and equity funds.

Rationale

Inflation has risen continuously since December 2020. The increase was initially confined to the energy component, but has subsequently spread to food and the other components. It is important to understand the extent to which the spread of inflation is the result of higher energy prices.

Takeaways

• The influence of energy prices on underlying inflation has increased.
• This is partly due to the larger size of recent shocks, but also to an intensification of the pass-throughof the changes in energy prices to other consumer prices.

Rationale

Digitalisation has made significant headway in recent years, particularly following the outbreak of the COVID-19 pandemic. Against this background, it is important to analyse how consumers’ payment habits are changing at the physical point of sale, online and person-to-person.

Takeaways

• In 2022, cash is the most commonly used payment method in Spain at the physical point of sale and in person-to-person transactions, but has declined compared with 2019.
• The decrease in the use of cash is primarily driven by two factors. First, the growth in online purchases, which limits the opportunity to pay in cash and, second, a shift in consumers’ payment habits, with an increase in the use of digital payment methods in their purchases.