The deterioration of the economic situation will continue in 2023. The European Commission has no doubts about that, so much so that it foresees that the euro zone will suffer a recession until the first quarter of next year, thus adding to the multiple predictions announcing this contraction . For Spain, these calculations mean that this year there will still be strong growth, 4.5% on average, but a very significant cooling in 2023, when the Spanish economy will barely grow 1%, according to the forecasts that this Friday the Community Executive. Although the Commission’s forecasts mean halving those of the Government (2.1%), they also mean that Spain will grow above the euro zone as a whole (0.3%) and the other large economies: France ( 0.4%), Italy, (0.3%) and Germany (-0.6%). Inflation in Spain will stand, according to Brussels, at an average of 4.8% in 2023.
Both in Spain and in Europe, the good performance of 2022 is mainly due to the strong pull with which the economy began the year. But as the months have passed, the effects of Russia’s invasion of Ukraine, the energy crisis, high inflation and the problems, which still exist, in the supply chains have been undermining the situation. “After a robust first part of the year, the economy of the European Union has entered a more demanding phase,” explains the European Commission with somewhat euphemistic language at the beginning of its statement.
“The shock triggered by Russia’s war of aggression against Ukraine are denting global demand and reinforcing inflationary pressures. The EU is one of the most exposed advanced economies, due to its geographical proximity to the war and its heavy reliance on gas imports from Russia. The energy crisis is eroding the purchasing power of households and weighing down production. Economic sentiment has fallen markedly. As a result, although growth in 2022 will be better than forecast, the outlook for 2023 is much weaker on growth and higher on inflation compared to the summer forecasts.
This last part of the explanation has been a constant as the months passed. The inertia carried over from the beginning of the year anticipated strong growth in 2022, which, although it has been reduced somewhat from the first calculations, is still enough to close the year with average increases of 3.2% in the euro zone and 3.3 % in the whole of the European Union. In Spain this figure reaches 4.5%, in line with the forecasts of the Bank of Spain and slightly more optimistic than the IMF (4.3%) and the Government (4.4%).
Differences between Brussels and Madrid
The worsening, however, has been greater in the forecasts for next year: barely 0.3% for the monetary area and the Union as a whole, and 1% for the Spanish case. Here there is more distance on the forecast of the Pedro Sánchez Executive, which points to an increase of 2.1%, the same figure that Brussels expected in the summer. The difference between the two anticipates a different reading of the public accounts that the Government has sent to Brussels, since they are based on that growth scenario of more than two points, double what Brussels calculates. This can already be seen in the calculation of the public deficit made by each other. Madrid puts it at 3.9%; Brussels at 4.3%.
“The euro zone and most of its members [han entrado] in a recession in the last quarter of the year”, explains the Commission. “The contraction of economic activity will continue during the first quarter. Growth is expected to return to Europe in the spring as inflation eases its pressure on the economy.”
Of course, in the first months of next year it does not seem that the long-awaited price relief will arrive. The forecast is that the year will close with an average CPI of 6.1% and 7% in the euro zone and in the EU, respectively. The situation would be less bad in the Spanish case, for which a price rebound of 4.5% is anticipated. “Inflation is expected to decline in 2023, but remain elevated, before moderating in 2024,” the Commission’s economists note.
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