Money is worth as much as what you can buy with it. And earning 1,000 euros a month in 2022 was not the same as doing it in 2021. Inflation, a word for many years banished from the vocabulary of economic risks, returned last year, but this exercise definitely exploded. The big macro figures, however, held up in this difficult environment. These are the main milestones of the year that is ending.
Eighties inflation. The 10.8% inflation reached in July was the unexpected maximum to which prices have risen this year. Behind that figure there is an electric bill runaway due to the high cost of gas, increases in fuel, and higher food prices. From maximums, Spanish inflation has fallen four points, which has led experts to forecast that increases have reached their ceiling. The road back to normality will be long: no body predicts a return to the 2% inflation rates that central banks estimate to be healthy in 2023.
The most expensive shopping cart. The moderation of inflation in the final stretch of the year has not reached the shopping cart. The price of food rose 15.3% annually in November after climbing another 15.4% the previous month, its all-time high. Sugar, cereals, eggs, milk, olive oil… are some of the products that are rising the most.
There are few signs of prices slowing down anytime soon. The energy skyrocketed after the Russian invasion of the Ukraine and, with it, all the costs of production, transport and raw materials rose. In the first part of the year the rise was more timid, but the trend has increased and has revived the debate on whether any intermediary in the chain is getting extra benefits from this situation. The Minister of Labor, Yolanda Diaz, asked supermarkets in September to create a basic shopping basket at affordable prices, but the sector refused, alleging that they already adjust their prices to the maximum and arguing that the best measure was to lower VAT on temporary way.
The increase in the cost of these basic products has changed the way of shopping: more frequent visits to stores, smaller purchases and increased sales of own brands. This is what is called “crisis consumption”.
Energy: the key piece in the inflation puzzle. Second year in a row with electrons and molecules at the forefront of the information plane. After extending all the tax reductions applied in 2021 on the electricity bill, the renewed tension on prices forced the Government to double the VAT cut on the electricity bill in June, which went from 10% to 5%. Shortly before —after months of arduous negotiations with Brussels— the Iberian exception had entered into force, a mechanism devised to prevent the contagion of high gas prices on electricity that has allowed Spain to go from being one of the countries with light most expensive in the eurozone to be one of the cheapest.
In October, on the eve of the heating season and a few weeks after the price of natural gas marked its all-time high, the social bonds for vulnerable groups were reinforced and those who live in blocks with a community boiler were allowed to take advantage of the rate of last resort (TUR), much cheaper than those on the free market and subsidized with public money.
Aware that if electricity does not drop, it will be impossible to completely bend the inflation curve, the Executive has taken advantage of the final stretch of the year to announce a new snip in electricity bill charges for 2023. One more push for the landing of prices in the wholesale market that futures draw may bring with it, at last, a relaxation in the energy component of the CPI.
New fuel peak. The tension had been noticeable for weeks before, but the start of the Russian offensive in Ukraine was definitive. The war not only made us look with concern at Eastern Europe, but also at the monoliths that announce prices at gas stations. Gasoline and diesel prices, which had already reached record highs shortly before the invasion, shot up even more, grabbing headlines announcing record highs week after week. The peak was reached in June: gasoline exceeded 2.1 euros per liter, 41% more expensive than the highest price up to this year. And diesel, which has subscribed to the anomaly of being the most expensive fuel, exceeded that limit by 45%.
However, those were not the amounts that drivers paid: on April 1, a discount of 20 cents per liter was released, supported partly by the public coffers and partly by large companies, which the Government extended until the end of the year. . The measure was discussed for being applied indiscriminately to all drivers, and not just to vulnerable families. Its cost until October was already close to 4,000 million and it did not prevent that, despite the bonus, drivers have paid more than ever to refuel, although it did relieve the bill somewhat.
The government intervenes. Those for fuels were not the only public aid that the Executive was forced to implement in the face of the uncertain economic context. On March 29, a royal decree-law was approved for “urgent measures within the framework of the National Response Plan for the economic and social consequences of the war in Ukraine”. It mobilized a total of 16,000 million, with 6,000 million destined for direct payments, which, in addition to fuel discounts, included a new reduction in VAT on electricity, an increase in the Minimum Vital Income and subsidies to sectors such as the primary sector, transport or the electrointensive industry. The package would also include a 2% cap on rent updates, to prevent these from skyrocketing at the same rate as inflation.
As the CPI showed that the high prices were not as temporary as initially expected, the Government prepared a second decree of measures at the end of June. This extended many of the previous ones at the end of the year (gasoline, rentals…) and added others such as the 200-euro check for households with an income of less than 14,000 euros per year, the freezing of the price of the butane cylinder or the gratuity and reductions in certain public transport. These last ones, by the way, have been extended for all of 2023.
Employment resists. Although it entered into force in December 2021, the labor reform was fully deployed in March. Since then, the new contracting framework has lowered temporary employment by four points (from 24.2% to 20.2%) and has made the discontinuous fixed-line contract the reference contract to replace temporary ones. However, if the new paradigm of labor relations has stood out for something during its first year, it has been for its unexpected imperviousness to the takeoff of inflation. The number of contributors has remained above 20 million since April and unemployment has dropped in months like October, when it traditionally rose. The statistical radiography has been called into question at various times during the exercise, despite the fact that the social agents agree to recognize the success of the norm in its first year of life. Doubts now focus on whether employment will resist the low growth that the economy will experience in 2023.
Pensions are revalued. The link of pensions with the CPI led to benefits improving by 2.5% in 2022. A percentage that, for the first time after the approval of the reform, matched them with the evolution that prices had experienced between the months of December 2020 and November 2021. In addition to this increase, the nine million pensioners received their last payment: an additional 1.6% to the 0.9% they received in January 2020, and for an average pension of 1,127 euros It was an extra 240 euros. However, the most important aspects of the second leg of the pension reform still remain to be resolved. Among them, the increase in the calculation of the years for the calculation of the initial pension, together with the uncapping of the maximum contributions and the highest benefits. Aspects that the Government had committed to Brussels to have ready before the end of the year and whose resolution is still up in the air. In 2023, in line with high inflation, its revaluation will be much higher, 8.5%.
The quotas of the self-employed are lowered. The Ministry of Social Security agreed in July with the organizations that represent the self-employed on a new contribution system based on real income. With this new scheme, self-employed workers with lower incomes will see their quota reduced over the next three years. Despite the fact that the full deployment of the new contribution regime contemplates a horizon of nine years, only the quotas for the next three have been defined, which have been collected as follows: in 2023 self-employed workers with a net below 670 euros they will pay 230 euros per month, they will pay 225 in 2024, and 200 in 2025. In the high tranche, above 6,000 euros, they will pay 500 euros in 2023, 530 in 2024 and 590 in 2025.
New taxes in the middle of a fiscal battle. 2022 has not been the year of the deep tax reform that the Government planned, but there have been several milestones, tax adjustments and scuffles on account of taxes. Among the objectives achieved are the conclusions of the expert committee for tax reform, which had been committed to the EU and which were presented in March. Since then, the economic situation has deteriorated and the Government has adjusted its shot: it has postponed the complete tax reform, and instead it has promoted changes for 2023 and new extraordinary taxes on banking, energy and large fortunes to finance the measures anticrisis. The communities, for their part, have announced widespread tax cuts, including wealth and personal income tax.
All these movements have caused sparks to fly. The new tax on the rich has led to the greatest confrontation between the Government and the communities, because in practice it harmonizes the wealth tax, which is managed by the autonomous communities. In fact, the greatest collection will come from the communities that fully or partially subsidize this regional tax: Madrid, Andalusia and Galicia, all governed by the PP. The new banking and energy taxes have also caused discomfort in the affected sectors. These taxes will not be applied to the benefits, but to the margin of interests and commissions in the first case, and to the billing in the second. Meanwhile, the collection of the Tax Agency is breaking records, pushed by galloping inflation: in October it had already exceeded everything entered in 2021.
Central banks change pace. The central banks have picked up the wire at full speed this year to undo the extraordinary monetary expansion that they had deployed to deal with the financial crisis, first, and the economic shock caused by the pandemic, later. The Atlantic Council estimates that the four big central banks (Washington, Frankfurt, Tokyo and London) pumped more than ten trillion euros to save economies from covid-19. However, that crisis was linked to another that required the opposite recipe. Inflation escalated on both sides of the Atlantic, to which central banks began to react aggressively in 2021.
The ECB has done it this year. And in addition to ending its debt purchase programs, in the six months between July and December it has raised interest rates from 0% to 2.5%. With this increase, the largest in its history, it returns the price of money to 2008 levels to combat inflation that is still at 10.1% in the euro zone as a whole. The Federal Reserve has also ended the year with another rate hike, leaving them in the range of between 4.25% and 4.5%. Unlike Europe, Washington has already begun another process that is expected to be complex: the reduction of the bond portfolio accumulated from the two crises. The ECB plans to start in March 2023 at an initial rate of 15,000 million per month. Very careful,
The Euribor changes trend. This escalation of interest rates to fight inflation has also had a negative effect for indebted families: the Euribor has rebounded strongly (closed November at 2.828%), which will hit the 3.7 million households with variable mortgages. Faced with this setback that will end up arriving in the coming quarters, the Government and the banks have agreed on a preventive assistance network: the Code of Good Practices, in force since 2012, was expanded for the most vulnerable (with incomes of up to 25,200 euros per year for which the mortgage burden has increased and whose monthly payment exceeds half of the net household income) and a new protocol has been created for families at risk of falling into a situation of vulnerability (with incomes of up to 29,400 euro, whose effort rate exceeds 30% and this, in turn, has increased by at least 20%). The catalog of measures includes grace periods, a reduced interest rate, a freeze on the installment and an extension of the life of the loan, among others, to reduce the pressure on the pockets of the indebted.
The return of tourism The recovery of tourism has been solid in 2022. After two years complicated by the restrictions imposed by the pandemic, the sector has breathed again. The improvement began in 2021 thanks to national tourism, but international tourism had been made to wait until this year. The arrival of travelers has touched pre-pandemic levels in recent months, in 2019, which was a record year with 83.7 million visitors. Last summer the sector recovered 88% of the tourists who arrived before the coronavirus and everything indicates that the year as a whole will be similar.
Neither recession fears nor rising prices have slowed down activity. Even this winter, which was expected to be more complicated, will be better than expected, according to forecasts from the hotel sector. The main indicators of activity and profitability are improving: profit per room reached 113 euros between October and September, 13% above 2019, according to a report by the Spanish Confederation of Hotels and Tourist Accommodations and PwC. Occupancy was 15% higher and average hotel prices reached 115 euros, 15% more.
Elon Musk’s crazy anus on Twitter. Elon Musk has changed in 2022 the title of richest man in the world for that of chief tweeter. He decided to buy Twitter in a fit, then wanted to back out for months, and ended up buying the social network for $44 billion when he got caught up in court. He entered the company as an elephant in a china shop. He fired half the staff and hundreds of other workers left by demanding absolute dedication, which he preached by staying the night at the company headquarters. He proclaimed a false “absolutism of free speech” that attracted hate messages and scared away advertisers. To compensate, he implemented the subscription system, again chaotically. He has readmitted Donald Trump to the network (who has given him pumpkins) and embraced part of the discourse of the extreme right and conspiracy. He assures that the use of the social network has grown, but the accounts do not end up leaving him and he has even stopped paying bills. Meanwhile, he continues with his growth plans at Tesla, SpaceX, Neuralink… They all have big projects for the next year. Elon Musk does not leave indifferent. He will be the protagonist of 2023 and will tell it with a tweet.
Layoffs in technology. For many tech companies, the pandemic was a golden age thanks to the change in consumer habits. The return to normality, strategic errors and the slowdown in the economy have left a hangover of tens of thousands of layoffs that has affected even technological giants that had only grown. Amazon is cutting up to 10,000 jobs, mainly in the area of devices. Meta (Facebook) announced 11,000 layoffs in full bet (unsuccessful for the moment) for the metaverse. Twitter cut its workforce of 7,500 workers in half with the arrival of Musk. The Snap social network announced in August the dismissal of 20% of its payroll of employees, more than 1,000 workers, after a slowdown in its growth and multimillion-dollar losses. Peloton joined in October with more than 4,000 employees and Netflix, with about 500. Uber rival Lyft, e-commerce payment platform Stripe, Intel and Microsoft are also downsizing, and giants like Apple and Alphabet (Google) are reining in hiring. Next year will tell if it is a growth crisis or a more worrying turnaround.
The long crypto winter The wonderful 2021 for cryptocurrencies made a very happy promise to investors in these highly controversial assets. But 2022 will go down in history as one of the worst years in its short history: the TerraLuna cryptocurrency collapsed, leaving hundreds of thousands of individuals without their savings, and the bankruptcy of platforms such as Celsius, BlockFi, and above all, FTX, added new victims and have spread mistrust towards a universe that needs it to survive. The crypto winter, as this lean period is called in the sector, seems to have no end. And all eyes are now on Binance, the world’s largest platform for buying and selling cryptocurrencies. A large part of the future of this industry, so exalted by some and reviled by others, depends on its survival.
Relief at Inditex. The Inditex empire has lived this 2022 one of its most relevant years. The Galician textile group, owner of brands such as Zara, Stradivarius and Massimo Dutti, has completed the generational change at the top with the departure last April of Pablo Isla, who replaced Amancio Ortega in 2011 as president, and the appointment of Marta Ortega, daughter of the founder, as non-executive president.
“Inditex has hits and misses, but it never stops,” Ortega, 38, said at his first shareholders meeting last July. The income statement is proving him right, at least for now. In this first fiscal year (beginning in February), Inditex is chaining record sales and profits: in the first nine months the turnover was 23,055 million euros, 19% more, and profits grew by 24%, up to 3,095 million. If it continues at this rate, it will close the fourth quarter surpassing its best year so far: 2019.
Clash with carriers. The Platform in Defense of Transportation, a group of self-employed and small freight forwarding companies, paralyzed the country for twenty days in the strike carried out last March. The rise in fuel prices and the low remuneration for delivery, which leads many truckers to work below cost, caused the conflict, even causing supply problems in supermarkets and the closure of factories due to lack of materials.
The Government reacted and approved subsidizing 20 cents of euros for each liter of fuel, direct aid of 450 million and urgently processed a decree law to ensure that the price of transport is equal to or greater than the costs incurred by the carrier, which finally entered into force last August. The measures were welcomed by the majority carrier organizations that make up the National Road Transport Committee (CNTC), and of which the Platform is not a part. This association returned to the charge and called a new strike on November 14 alleging breaches of the law, but had to call it off just 24 hours later due to the lack of follow-up.
Abengoa’s last bullet, On July 29, the head of the Mercantile Court Number 3 of Seville ratified the liquidation of Abengoa, SA, the parent company of a business conglomerate that had embodied the symbol of industrial and technological development in Spain. The dissolution was the end point for an entity founded in 1941, whose decline began to take shape in 2015 and which was later unable to overcome three failed rescues and a bankruptcy.
SEPI’s refusal to contribute the 249 million for its restructuring at the end of June forced it to design a strategy to save Abengoa’s business units that are profitable. In 2021, the multinational billed 1,000 million euros per year and recorded operating profits of more than 160 million, but was weighed down by a debt that was close to 5,000 million euros. On November 10, Abenewco1 —the subsidiary that monopolized all the company’s assets— and 27 other companies that depend on it entered bankruptcy proceedings. The Via Crucis to save its 8,700 jobs, 2,000 of them in Andalusia, however, does not end. On December 12, the judge extended the deadline to submit offers, lengthening the uncertainty. The bankruptcy administration and the company committee have supported the proposal for the acquisition of Urbas, which has been joined in recent days by Ultramar Energy and the British fund Sinclair. All are committed to guaranteeing the subsistence of the entire sub-spectrum of the company’s business and maintaining the entire workforce.
