Inflation and the consequences of the war force the Executive to cut its previous estimate for 2022 by almost three points and Calviño acknowledges that the strong recovery in tourism “does not compensate” for the worse international context
The war in Ukraine has eroded the way out of the crisis throughout Europe and Spain could not be an exception. The Government has been forced to lower its economic growth forecasts to 4.3% for this year, from 7% of its previous estimates sent to Brussels. It is a more adjusted projection than the one presented by economic organizations, with the Bank of Spain betting on an advance of 4.5% and the International Monetary Fund (IMF), of 4.8%.
The Government has sent this Friday to the European Commission its new Stability Plan, since the term ended on April 30. And beyond the fiscal details of the document, the macroeconomic table presented this morning by the Economic Vice President Nadia Calviño and the Minister of Finance, María Jesús Montero, reveals that there has been a turn of the wheel due to the worse performance of the economy, which after overcome the pandemic, it is now facing a rise in inflation not seen since the 1980s due to the consequences of the war and the rise in energy costs.
In the presentation of these data, Calviño highlighted the “prudence” and “rigor” of the Government in a very unstable context and highlighted the “strong growth” that investment will experience (9.3%) in 2022, although construction ” still lags behind.” The vice president recognized that the strong recovery that tourism is experiencing “does not compensate” for the deterioration of the international situation and the worse growth prospects of our main export markets.
All these elements will lead the economy to grow almost three points less than expected this year, but the Executive is confident that the situation will straighten out and that in the coming years the economy will advance at a level similar to that previously calculated. Thus, the GDP will grow by 3.5% in 2023, 2.4% in 2024 and 1.8% in 2025. With these data on the table, Calviño assured that the Spanish economy will have fully recovered from the pandemic in the first half of 2023.
The IPC will moderate
The loss of strength in inflation will contribute to this, although it is now soaring (in April it reached 8.4% after the record of 9.8% in March). According to the Executive’s forecasts, the CPI will moderate during the second half of the year until closing the year at an approximate average of 6%, which would fall to 2% next year.
But consumption, an element on which the recovery of recent years has been based, has slowed down. The data published this Friday by the INE reveal that household spending fell by 3.7% from January to March. However, Calviño is confident that the “significant dammed savings” of households thanks to the measures implemented during the pandemic is a “cushion” with which to face high inflation and uncertainty. According to his calculations, household consumption slowed down in the first quarter as a result of the carriers’ strike in mid-March, but he is confident that the second quarter (April to June) will have a better evolution.
«Very positive» evolution of employment
This increased spending by families despite the rise in prices will be influenced by the “very positive” trend in employment, especially from April, confirmed Calviño, who also stressed that it is of “higher quality” since the start-up of labor reform. The Executive’s forecasts point to an unemployment rate of 12.8% for this year, which means cutting two points from the past, and that it will be reduced below 10% in 2025.
The Fiscal Authority (Airef) endorsed these forecasts, although it warned in its report that no details have been offered on the impact of the Recovery Plan and recommends that the Government make a “transparency effort on its execution.”
Despite everything, Spain exceeds the eurozone average in the first quarter, which registered growth of only 0.2% according to data published this Friday by Eurostat. The highest rate of growth among the countries of the common currency with available data is taken by Portugal (2.6%), while the lowest was that of Italy (-0.2%). These data are much better than those of the United States, which registered a contraction of -0.4% from January to March after having grown by 1.7% in the last quarter of 2021.
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