Economists consider that Spain will grow 4.2% this year thanks to tourism but only 2% next year
The extremely high inflation has gone from being a circumstantial event to becoming “chronic” over time and economic organizations are already making their calculations with a much more pessimistic view of the future. This Monday it was the turn of Funcas, who revised upwards the average inflation estimate for this year to 8.8%, the highest given so far after 8.1% from the OECD and the European Commission.
For this reason, they demand that pensions be included in the “necessary” income agreement between employers and workers, currently paralyzed until after the summer after two meetings without agreement. “The income pact should definitely consider pensions because it is the income received by 9 million Spaniards and it is a very large component of total public spending,” explained Carlos Ocaña, director general of Funcas, during the presentation of the report.
In his opinion, the income pact is “necessary” to “avoid the inflationary spiral.” In addition, raising pensions linked to an average inflation of 8.8% would mean increasing public spending by 1%, which is a “very significant burden for State Budgets that will have to face higher expenses due to the accumulated debt with a rise in interest rates,” said Ocaña.
However, from the Government they continue to affirm that pensions will be updated according to inflation, whatever it may be. This was confirmed again by the economic vice president, Nadia Calviño, this Monday, who pointed out that the revaluation of pensions “is established by law, it is a commitment to our elders that we are going to fulfill.” Calviño positively valued the income pact to “prevent inflationary tensions from having a more permanent character”, but leaving pensioners out.
On the verge of recession
Inflation, which next year will continue at 5% according to Funcas forecasts, will weigh down the economy as a whole. Although the ‘think tank’ continues to calculate that GDP will grow by 4.2% this year, there is a “substantial change” in the components that explain this progress. Domestic demand, until now the mainstay of the economy, will plummet to 2.1% this year, 1.7 points less than the previous forecast. What balances these accounts is that foreign demand advanced by 1.7 points to 2.1%, above all due to the pull in tourism expected for this summer.
In this way, what is revised downwards is the growth forecast for 2023, which remains at 2% instead of the 3.3% previously estimated. “Between 2022 and 2023 the contribution of consumption will have been reduced by three points, it is very significant,” revealed Raymond Torres, director of the Funcas situation.
Even so, Torres assures that they do not consider a recession scenario, but one of “strong slowdown.” In fact, according to its quarterly forecasts, which leave the last part of the year at 0%, Spain will remain “bordering on recession”. His estimate is that after a first quarter of growth of 0.2%, the second quarter the increase will be 0.7%, the third 0.5% and the fourth zero. The pull of the second and third quarters is motivated by the good progress of tourism, which is expected to reach pre-pandemic levels this summer. Of course, if the cancellations and the collapse of several European airports affect the arrival of foreigners in Spain, “it could compromise growth,” said Torres, although hotel reservations for now do not indicate that this will happen.
As for the new taxes on electricity companies and banks that President Sánchez announced last week, they consider it “doubtful” that they will finally be applied because they have not yet materialized and the Government also announced a tax on energy months ago and has not materialized yet. In any case, they explain that it will be a levy with a “Robin Hood motivation”, which usually has the drawback that they raise less than the expense they entail for companies.
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