Spain’s economy is set for modest growth in 2023

Significance

The economy’s performance has been aided by strong fiscal support, less exposure to high international energy prices and a resilient services sector. Headline inflation fell markedly from July but has ticked up at the start of 2023.

Impacts

• The indexation of pensions, combined with an ageing population, will increase the weight of pensions on government spending.
• Rising interest rates will have a disproportionately adverse impact on Spanish households, as many have variable-rate mortgages.
• Persistently high inflation could undermine the centre-left’s re-election prospects in the general election later this year.