Spain’s economy surpasses expectations with estimated 5 percent growth in 2021

Spain's economy grew by 5.0 percent in 2021, showing a remarkable bounceback from a year earlier but below the government's target, an initial estimate by the National Statistics Institute (INE) showed Friday.

Madrid's Cuatro Torres business area.
Madrid's Cuatro Torres business area. The INE figures showed the economy grew by 2.0 percent in the last quarter of 2021. Photo: Alberto Sanchez /Pixabay

The government had expected gross domestic product (GDP) to rise by 6.5 percent in 2021 after a year in which it contracted by nearly 11 percent in one of the worst results of the eurozone.

Such a forecast was considered unrealistic by economists.

However the INE estimate outdid the expectations of the Bank of Spain and the OECD, which were both estimating growth of 4.5 percent.

And it also exceeded the expectations of the International Monetary Fund (IMF), which had expected the economy to grow by 4.6 percent.

The INE figures showed the economy grew by 2.0 percent in the last quarter, largely resisting the emergence of the Omicron variant and supply problems that affected production.

It had reached 2.6 percent in the previous quarter.

Fourth-quarter growth was also achieved despite sluggish consumption, which fell by 1.2 percent.

In recent months, Spanish household spending has suffered from soaring inflation, which reached a 30-year high of 6.5 percent in December due to surging energy prices.

According to Funcas think tank, inflation is expected to slow slightly in 2022 but remain at a high of around 3.5 percent, while growth should accelerate to 5.6 percent, allowing for the losses of 2020 to be finally reversed.

The Spanish government, which is predicting growth levels of 7.0 percent this year, well above the expectations of the main economic bodies.

It had initially pledged a return to pre-pandemic growth by the end of 2021.

But this is unlikely to happen until early 2023, according to the European Commission.

READ ALSO: Spain’s unemployment rate falls by 615,000 to lowest level since 2008

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Qatar to invest an extra €4.75 billion in Spain

Qatar on Wednesday said it plans to invest an additional $5 billion (€4.75 billion) in Spain on the second day of a state visit by its emir, Sheikh Tamim bin Hamad Al-Thani.

Qatar to invest an extra €4.75 billion in Spain

“The volume of investments agreed upon with the Spanish side amounts to $5 billion in various sectors,” said Qatari Foreign Minister Mohammed bin Abdulrahman Al-Thani in a statement tweeted by his ministry.

Neither side gave a timetable for the investment, which amounts to some €4.75 billion, nor did they say which sectors would benefit.

“Qatar will invest close to five billion euros in our country in the coming years,” Prime Minister Pedro Sánchez said during a business meeting with the Qatari delegation.

“It is a gesture of confidence in the Spanish economy and Spanish businesses which will strengthen bilateral ties,” he said ahead of afternoon talks with the emir.

Before the pandemic, Qatari investment in Spain stood at €2.67 billion ($2.8 billion), the Spanish government said, making it the country’s 24th biggest investor.

To date, Qatari funding has been notably invested in several sectors: civil aviation, construction, energy and communications.

According to a Spanish government source, the two sides will on Wednesday sign around a dozen commercial contracts, notably concerning energy as Madrid seeks to diversify its gas supplies following Russia’s invasion of Ukraine.

Qatar, one of the world’s three biggest exporters of liquified natural gas (LNG), is currently Spain’s fifth-largest supplier after the United States, Algeria, Nigeria and Egypt.

The country accounted for 4.4 percent of Spain’s total gas imports in April and the Spanish government hopes to increase this share.

European states are increasingly looking to other sources of natural gas as they try to wean themselves off dependence on Russia, with LNG easily shipped by boat from countries such as Qatar and the United States.

After Madrid, the Qatari leader will continue his tour of Europe, visiting Germany, Britain, Slovenia and Switzerland, where he will attend the World Economic Forum in the mountain resort of Davos which runs from May 22-26.

Qatar will host the World Cup later this year.