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Inflation in Spain Soars to almost 10%

The inflation in Spain reached 9.8% in March 2022
Inflation in March 2022 has been the highest since 1985 and has jumped from 7.6% in February 2022
The record-high inflation in Spain has slowed the economic and fiscal recovery from the covid-related crisis

Inflation in Spain Soars to almost 10%

Inflation in Spain increased at an unprecedented rate to 9.8% in March 2022. Inflation reached a record high after almost four decades, when it had breached the 10% mark last in 1985. Inflation in Spain resulted from disrupted supply chains, increase in food prices, and high energy prices due to the Russia-Ukraine war. After the pandemic-related economic slowdown, the country was on track to economic recovery with a robust labor market and increased industrial production. Since the outbreak of the Russia-Ukraine war, however, supply chain issues and dwindling stocks have become a regular phenomenon all over the country. The following reasons contributed to inflation in Spain :

Spain's trucker strike

Truckers in Spain resorted to a nationwide strike, protesting the increasing fuel prices and demanding a reduction in fuel taxes. The strike resembles the emerging international movement of truckers against inflation and increasing fuel prices. The truckers’ strike had a domino effect, disrupted the supply chain of various commodities, and resulted in the shortage of goods in Spain. Shortage of food, water, fuel, automotive parts, cars, wood, and other essential supplies resulted in this strike.

Energy shock from the war:

Since the Russia-Ukraine war broke out, Europe faced an energy crisis as most of the continent was reliant on Russia and Ukraine for its energy needs. The global increase in fuel prices crippled the supply chain and increased transportation prices for all commodities. The high price of electricity and gas led heavy industries such as automotive, steel, and others to halt their production in Spain.

Supply chain disruptions

The combined effect of increasing prices of commodities, fuel prices, truckers’ strikes, and halted operations led to disruption in the supply chain. The current Russia-Ukraine war led to panic buying and caused a shortage of supplies.

The record-high inflation in Spain is the cumulative effect of these factors. The volatility in the energy market, supply chain disruption, shortage of supplies, and the uncertainty of the war increased pressure on consumer prices, and the sustained increase in consumer prices translated into inflation that reached 9.8% in March 2022.

Spanish government intervenes to lower inflation

To reduce inflation and prevent the shortage of commodities, the government initiated the following measures:

The government approved a €16 billion fund named the “shock plan”, the package is split into €6bn in direct aid and tax breaks, and €10bn in loans for enterprises. The package also includes a reduction in fuel prices.
Spain and Portugal are working together with the European Union to cap the prices for natural gas that is used to generate electricity, which will effectively reduce the price of electricity.
In order to curb supply chain disruption, the Spanish government temporarily authorized stores across the country to ration their products.

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