Annual Report 2022

Abstract

Inflation and uncertainty have weakened economic activity worldwide 41 3 Spain: from the reopening momentum to resilience in the face of the energy crisis 43 4 Slowing energy prices in Spain have helped significantly lower headline inflation in recent months, but underlying inflation remains high 48 5 Inflation and tighter financing conditions weakened consumption and investment in 2022 H2 53 6 The external sector was key to sustaining output growth 56 7 Domestic and supranational European economic policy responses in recent quarters 60 References 65 Box 1.1 Macroeconomic impact of support measures to address the surge in inflation and the energy crisis 67 1 Introduction 73 2 The lack of convergence with per capita income in the euro area 73 2.1 The role of innovation in productivity 75 2.1.1 Fostering business growth and mechanisms for cross-firm and cross-sectoral allocation of factors of production 76 2.1.2 Encouraging innovative activities 80 2.1.3 Reinforcing the central role of institutions and general government 82 2.2 The employment rate and labour supply: key features 85 2.2.1 The institutional framework 86 2.2.2 Human capital 90 2.2.3 Other key factors in labour supply 94 3 Main imbalances in the Spanish economy 97 3.1 Public indebtedness 101 3.1.1 Recent developments and short-term outlook 101 3.1.2 Public debt dynamics in the medium and long term 104 3.1.3 The much-needed fiscal consolidation plan 113 3.1.4 Reform of the European fiscal rules and governance framework 116 3.2 Household vulnerabilities 118 3.2.1 The residential rental housing market in recent years 122 References 126 Box 2.1 Contributory unemployment benefits: a granular analysis drawing on social security administrative labour records 133