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ECONOMY

Spain’s growth accelerates but falls short of summer season forecasts

Growth in the Spanish economy picked up pace in the third quarter as coronavirus restrictions were eased during the critical summer tourist season, data released Friday showed, but still fell short of expectations.

Published: 29 October 2021 10:47 CEST

A waiter waits for customers at a restaurant near Playa de Figueretas in Ibiza on July 30, 2020. - There is no second wave of the coronavirus pandemic in Spain despite a fresh surge in infections in the country, a top health ministry official said. The pandemic has dealt a major blow to Spain's key tourism sector, which accounts for about 12 percent of its economy. (Photo by JAIME REINA / AFP)

A waiter waits for customers at a restaurant near Playa de Figueretas in Ibiza. Spain's growth in the third quarter was driven by the services sector which expanded by 3.2 percent.(Photo by JAIME REINA / AFP)

Data from Spain’s national statistics office (INE) showed that the Spanish economy grew by 2.0 percent from July through to September compared to the previous three months.

While that was an improvement from the 1.1 percent growth rate in the second quarter, that figure was a sharp revision lower by INE from its initial estimate of 2.8 percent growth for that quarter as consumption turned out to be lower than expected.

That takes much of the shine off the third quarter results.

Moreover, Spain’s national bank had been forecasting 2.8 percent growth.

It will also impact annual growth performance and the government budget.

“A revision of that scale mechanically results in a steep drop in 2021 GDP growth and to a more limited extent in 2022,” said the head of Bank of Spain, Pablo Hernández de Cos.

The Spanish government, which forecasts 6.5 percent growth this year, did not immediately update its outlook. Nor did the Bank of Spain, which has a forecast for 6.3 percent growth this year.

Growth in the third quarter was driven by the services sector which expanded by 3.2 percent.

The commerce, transport and hotel sector rose by 7.9 percent.

The industrial sector expanded by 2 percent and construction by 1.8 percent. Agriculture contracted by 5.5 percent.

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Spain is the fourth EU country with the highest inherited poverty

Spain is EU country with most middle-class young people who end up poor. Photo: Jaime ALEKOS / AFP

Spain is also the fourth EU country with the highest rate of inherited poverty risk, according to Eurostat, the EU Statistical Office.

Data on intergenerational poverty indicates that there is a correlation between the financial situation of the household you grew up in and the risk of being poor when you reach adulthood and in Spain, there is a strong link.

The latest statistics available from 2019 show that the at-risk-of-poverty rate for the EU was 23 percent among adults aged 25 to 59 who grew up in a poor financial situation at home when they were 14 years old. This is 9.6 percentage points more than those who come from families without financial problems (13.4 percent).

READ ALSO: Spain’s inflation soars to 29-year high

How the situation in Spain compares with the EU

Spain has become the EU country with the highest risk of poverty among adults who grew up in families with a good financial situation – 16.6 percent.

This was followed by Latvia with 16 percent and Italy with 15.9 percent.

That statistics also show the countries where it is less likely to be poor after growing up in households without economic difficulties. These include the Czech Republic (5.9 percent), Slovakia (7.9 percent) and Finland (8.5 percent).

The overall poverty rate in the EU decreased by 0.1 percentage points between 2011 (13.5 percent) and 2019 (13.4 percent), but the largest increases were seen in Denmark (1.9 points more), Portugal (1.8 points), the Netherlands (1.7 points) and Spain (1.2 points).

On the other hand, the biggest decreases in the poverty rate were seen in Croatia (-4 percent), Lithuania (-3.6 percent), Slovakia (-3.5 percent) and Ireland (-3.2 percent).

READ ALSO: Spain’s government feels heat as economic recovery lags

Inherited poverty

The stats revealed that Spain was also the fourth country with the highest rate of inherited poverty risk (30 percent), only behind Bulgaria (40.1 percent), Romania (32.7 percent) and Italy (30.7 percent).

This means that children of poor parents in Spain are also likely to be poor in adulthood.

The countries with the lowest rate of inherited poverty risk were the Czech Republic (10.2 percent), Denmark (10.3 percent) and Finland (10.5 percent).

The average risk-of-poverty rate for the EU increased by 2.5 percentage points between 2011 (20.5 percent) and 2019 (23 percent), with the largest increases seen in Bulgaria (6 points more), Slovakia and Romania (4.3 points), Italy (4.2 points) and Spain (4.1 points).

The biggest drops were seen in Latvia (-8.5 points), Estonia (-8.0 points) and Croatia (-2.3 points).

The largest gaps in people at risk of poverty when they reach adulthood were in Bulgaria (27.6 percentage points more among those who belong to families with a poor economic situation as teenagers compared to those who grew up in wealthy households), Romania (17.1), Italy (14.8), Greece (13.5) and Spain (13.4).

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