Economic recovery in Spain: per capita income returns to pre-Covid levels

Four years after the outbreak of the pandemic, per capita income in Spain has finally managed to recover to pre-Covid levels, a positive news that comes in the first quarter of 2024, according to data from the National Statistics Institute (INE). Despite the fact that the economy as a whole had recovered its previous levels much earlier, in the third quarter of 2022, real income per capita has been weighed down by the inflation crisis, which has caused a delay of up to a year and a half in returning to the pre-Covid situation once the effects of prices are discounted. The economic recovery has been robust, with strong GDP and employment growth, partly driven by the support of the European Central Bank (ECB) to stabilize the markets and allow the State to intervene effectively. However, despite these advances, inflation has impacted per capita income, affecting the well-being perception of Spanish families. Although there has been a nominal increase in incomes, inflation has eroded part of that progress, generating difficulties in recovering the lost purchasing power during the crisis. GDP growth has outpaced per capita growth, partly due to the increase in population through migratory flows that have boosted employment, especially in the tourism and services sector. However, this extensive growth has not translated into a significant advancement in productivity, as indicated by economist Rafael Doménech of BBVA. This has contributed to the disparity between economic growth and per capita income, reflecting a challenge in terms of efficiency and distribution of growth. Despite strong economic growth, wages in the last twelve months have not fully restored the purchasing power lost during the pandemic and inflation crisis. Although there have been increases in the average annual remuneration, accumulated inflation since 2019 has hindered a full recovery of workers' purchasing power. The increase in the minimum wage and wage hikes in sectors with labor shortages have helped raise the average salary, but inflation has impacted citizens' consumption capacity. The increase in revenue and public aid have played an important role in the recovery of family incomes, which have grown more than the economy as a whole in recent years. However, income stagnation coexists with high savings rates since the pandemic, reflecting a trend towards caution and debt repayment. Per capita consumption is still below 2019 levels once inflation is taken into account, suggesting that families are being cautious in their spending and preferentially saving amid economic uncertainty. In summary, the recovery of per capita income in Spain is a positive sign of post-pandemic economic recovery, although persistent inflation and income stagnation pose challenges in terms of growth distribution and economic well-being of the population. The gap between GDP growth and per capita income highlights the importance of addressing economic recovery comprehensively to ensure sustainable and inclusive development in the future.