The Spanish economy is at a crossroads. The conflict with Iran has raised the alarms of the Economic Observatory of Francisco de Vitoria University (UFV), which warns about the country's critical exposure to an international clash that threatens energy, trade, and financial markets.
"The vulnerability of Spain is not only cyclical, it is structural", assures the report prepared by a team of top-level experts, among them Pedro Schwartz, Francisco Cabrillo, Jaime García-Legaz, Gregorio Izquierdo, Fernando Merry del Val, Javier Fernández-Lasquetty and Pedro Cortiñas, under the direction of José María Rotellar.
The strait that moves the world
The Strait of Hormuz concentrates the risk: about a fifth of the world's oil transits through there. Any interruption shoots up prices, makes transport and logistics more expensive, and reduces the purchasing power of households. Tourism, vital for Spain, is also affected when global uncertainty retracts the spending of international visitors.
The Observatory's report highlights that, in our case, "labor rigidity, bureaucracy, and high public debt aggravate Spanish vulnerability to external crises, slowing down the economy's adaptation capacity."
Three possible scenarios
The document draws three scenarios that show how the Spanish economy could evolve according to the duration and intensity of the conflict:
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Short war: undoubtedly, the most optimistic of all. This contemplates an inflation growth between 3% and 4% and, of oil between 100 and 110 dollars per barrel. It presupposes that the conflict would end by the end of March or beginning of April. In this scenario, GDP would grow by 2.06% (compared to the 2.24% estimated in the base scenario) and employment would increase by 1.93% (vs. 2.1%). Quarter-on-quarter growth in the second quarter would remain practically flat.
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Long war: in this case, persistent inflation would escalate above 4% and oil would exceed 120 dollars-barrel, with a prolonged impact of the crisis. GDP growth would be reduced to 1.49% and employment would grow only 1.4%. In this scenario, the second quarter could register negative quarter-on-quarter growth of two tenths.
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Total crisis: Here inflation would exceed 5% and oil could reach peaks of up to 150 dollars-barrel, with financial tightening and loss of confidence. GDP would grow barely 0.53% and employment 0.5%, with a quarter-on-quarter recession of up to 1.4% in the second quarter.
These numbers show that the economic impact could range from a slight slowdown to almost two percentage points of growth loss and a strong deterioration of employment.
Budgets with zero base
UFV experts insist that the solution is not more public spending nor populist measures, which could worsen imbalances. What is needed -they argue-, "are structural reforms and intelligent fiscal measures, such as the general reduction of energy taxes, the deflation of personal income tax to maintain purchasing power, incentives for companies, and above all, zero-based General State Budgets, eliminating unnecessary expenses and prioritizing essential ones".
The European gaze
The analysis transcends Spain. Raphael OlszynaMarzys, a highly prestigious international economist, and Alex Rohner, an expert in fixed income strategy at J. Safra Sarasin Sustainable AM, highlight the urgency for Europe to transform general ambitions into measurable objectives, with clear supervision and rapid execution. Both experts emphasize that dependence on raw materials and strategic resources limits European autonomy and necessitates strengthening the continent's resilience.
For investors, this implies a more active industrial policy, with the creation of strategic reserves and careful management of geopolitical risks. The lesson is clear: "Unity is the European advantage, and it must extend to like-minded partners beyond the EU."
Spain and Europe face a decisive challenge. Acting decisively, applying structural reforms, and strengthening the economy will allow for cushioning the effects of this crisis and preparing for future shocks. Because, if not done -these two experts warn-, "this could deepen the impact of an international conflict that is already shaping the global economic agenda"l.