Spain recovers pre-pandemic per capita income levels after four years of efforts

Four years after the start of the pandemic, Spain has finally managed to recover the levels of per capita income prior to the COVID-19 crisis, an encouraging sign that the country's economy is recovering. According to data from the National Institute of Statistics (INE), this milestone was reached in the first quarter of 2024, despite the fact that the overall economy had recovered pre-pandemic levels much earlier, in the third quarter of 2022. The path to recovery has not been easy, with various challenges affecting the Spanish economy, such as the energy crisis, bottlenecks in the supply chain, rising prices, interest rate hikes, and economic slowdown in Europe and the industrial sector. Despite these obstacles, the economy has managed to overcome them with solid growth in both GDP and employment, thanks in part to the support of the European Central Bank (ECB) which has helped maintain stability in financial markets. However, despite the economic recovery, per capita income has been affected by inflation, delaying its progress compared to GDP growth. During the period between April 2023 and March 2024, per capita income was only 0.49% higher than in 2019 once adjusted for inflation, meaning that four years have been lost in terms of real income. Economic growth has been largely driven by population growth, mainly through migratory flows that have contributed to rapid job growth in sectors such as tourism and services. However, despite this growth, productivity has been poor, leading to disparities between GDP growth and per capita income. Despite the dynamism of the economy, wages in Spain have not fully recovered the purchasing power lost during the pandemic and inflation crisis. According to recent data, the average salary per wage earner is still 2.5% below the pre-COVID period once inflation is taken into account, reflecting the challenges faced by workers despite wage increases in sectors with labor shortages. The increase in inflation has further hampered the recovery of purchasing power, even though household incomes have increased thanks to public assistance such as the minimum income guarantee, pension revaluation, and strengthening of subsidies for unemployed individuals over 52 years old. Despite these efforts, stagnant incomes have led to a significant increase in household savings since the start of the pandemic. The increase in income and wealth taxes has helped finance these aids and mitigate the impact of the crisis on household incomes. However, despite these efforts, per capita consumption is 3.7% below 2019 levels once adjusted for inflation, suggesting that the economic recovery has not fully translated into greater well-being for citizens.