The economy will slow down this summer due to a slowdown in public works following the election

When the election comes, the administration comes to a standstill. Even more so if two elections follow each other without delay, as happened between the municipal elections of 28-M and the general elections of 23-J. Cortes’ dissolution and the government in office not only threw out existing laws.

Any decisions made in these weeks that indicate an election overlay will be under the magnifying glass of the Election Board. Until a new tenant is installed in Moncloa by the PP or PSOE, the engine of the public economy will not be refueled. Without a drag on state investment, Spain will continue to improve throughout the summer, but it will do so from an outright recession; who has driven him strongly since the start of the year. But a little more.

Management exercises a pulling power over the economy that no other actor has. Only in 2022, the weight of public expenditure in Gross Domestic Product (GDP) will exceed 47% of the total.

The ministerial machine continues to work, but it works in a very discreet manner. The decisions that ministers can take are narrow-minded, administrative. Most major issues (public works, awards, contracts, etc.) are on hold. This scenario is transferred from the BOE to all pending business and labor actions.

Calculations by various institutions suggest that the economy will grow between 1.5% and 2.1% in 2023. GDP has already started with a 3.8% year-on-year rise in the first quarter; A figure is expected to be higher between April and June when final data is known. The real-time Airef GDP thermometer already expects the economy to grow by 1% this quarter and do so at a rate of more than 2% for the full year.

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Increases from January to May

Regardless of whether government action stalls in the coming weeks, Spain will continue to move forward. Thanks for the pace this first semester. And it will continue like this till September at least. That’s the assessment Funcas embodied in one of his latest statements, before Pedro Sánchez Cortez’s surprise dismissal. The study indicated that the economy would go “from high to low” and there would be a “clear slowdown” compared to the 5.5% recorded in 2022.

In the short term, strong factors persist, such as rising energy prices, the normalization of tourism and the rate of action of European funds. But the impact of the ECB’s rate hikes, even higher inflation and tensions in banking markets play against this.

Construction related companies have been hit the hardest by the election call. Although they have noticed – as usually happens – the surge of their activities in the last months before the elections: the tender for public works has improved by more than 10% in the first four months to more than 8,000 million euros. Employers’ Association to Siobhan.

Pending regulation

However, three sectors are banking (due to the future of extraordinary tax), energy (due to market regulation and pending measures, new regulated fees, etc.) and the real estate market (due to the application of the Housing Act). Both the suspension of operations and the strategic decisions a future executive may make emerging from the referendum are pending. One of the first decisions this government will have to make is to implement the budget law for 2024 once it comes to power. This will be his first big assignment.

The question of money coming from Brussels to Spain is also important in the middle of the campaign. Without these transfers, recovery of the operation will suffer from one of its pillars. Nadia Calvino, the deputy head of the economy, announced last Wednesday that she would send a package of rescue plans to Brussels this week. It does so because “this process of mobilizing resources will not stop because the deadline is 2026.”

Although governmental and legislative activities are practically at a standstill until September, the initiative is not unusual for Spain to continue to move forward at its own pace. This is a new infusion of 84,000 million euros through loans, whose function is to complete the recovery plan in the second phase. A further 7,700 million additional transfers should be added to this European aid – due to accumulated delays – and 2,600 million to RepowerEU. In total, 94,300 million euros are pending request and receipt by Spain.

Activities between rally and rally

The other major economic issue pending in the coming weeks is the government’s decision with the current anti-crisis aid package. It expires on June 30. And it shall approve (modifications, extensions or suspensions) of the Ordinance. Who will ratify it in the Cortes? One of the mechanisms operating this election season is the Permanent Representation, an alternative to the overall action of Congress.

Among other measures, the price reduction on passes and public transport tickets expires at the end of the month (not the Renfe Cercanias and medium-distance discount), the fuel discount for carriers and the VAT reduction on food. Measures to reduce power charges, 5% reduction in VAT are planned till December 31.

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