Nonetheless, the transformation of the financial crisis into a real recession has given rise to a second wave of risks to financial stability, whose nature is this time eminently macroeconomic. The Spanish financial system is facing this second wave with the relative advantage of having been less damaged by the first. But that is no guarantee of immunity since the deterioration of the Spanish economy exerts pressure, through various channels,  BIS Review79/2009  3  on banks’ and savings banks’ income statements. I shall discuss this when I turn to the financial system, after having analysed the situation of and outlook for the Spanish economy. The Spanish economy did not escape unscathed from the global contractionary trends, and in 2008 it underwent a far-reaching adjustment. Declines in GDP were evident from the third quarter, leading the economy to post a 0.7% fall in output at year-end in terms of its year-onyear rate. This recessionary pattern became more visible in the first quarter of 2009, when GDP decreased at a year-on-year rate of 3%, while employment was down 6% on its level a year earlier. As at world level, the improvement since in the latest indicators appears to point to some easing of the contractionary trends. The adjustment of the Spanish economy is impacting particularly those domestic spending components which showed the greatest excesses during the long upturn. The origin of this behaviour lies in the overlapping of a series of differing shocks.
However, it remains stronger than expected, mainly supported by private consumption, with households continuing to spend their stock of savings, strong and widespread jobs growth and unemployment at very low levels. In addition, the inflation path may be conditioned by the end of the zero-COVID policy in China and the subsequent reopening of the Chinese economy. Once the surge in infections has passed, the Chinese economy will foreseeably regain dynamism supported by consumption, amid a recovery in mobility and the more contact-intensive activities, along with the release of pent-up demand. Although there is much uncertainty about the extent of this reopening, in January the IMF revised up China's GDP growth outlook for 2023 by 0.8 pp to 5.4%. This growth will have an impact on global economic activity and inflation. Increased Chinese demand will boost euro area activity through the exports channel and thus also drive inflation. In addition, China will exert significant inflationary pressures on energy commodities and metals, as it is one of the world's largest consumers of these items. IMF staff estimated that Chinese domestic demand rising by 1 pp of GDP would lead to an increase in oil prices of almost 10% and in metals prices of between 6% and 12% over a one-year horizon. 12 An increase in China’s gas consumption could also have a particularly strong impact on gas prices, taking into account that China played a very significant dampening role in 2022, when its demand for liquefied natural gas declined by 20%.