AIReF grows by 4.3% in 2022, 2 tenths higher than the Bank of Spain

The Independent Fiscal Responsibility Authority (AIReF) cut its GDP growth forecast for 2022 by two points, to 4.3%, due to the impact of the war in Ukraine, which is two tenths behind the latest estimate of the Bank of Spain. 4.5%, after a reduction of 9 tenths.

AIReF, on the other hand, was more optimistic about rising prices, with inflation expectations accelerating by an average of 6.2% this year from 7.5% estimated by the Bank of Spain, and this does not include the gas limit. That Spain and Portugal have offered us, known as the Iberian Exception, awaiting the approval of the European Commission.

The measure, which will cut “electricity bills in half”, is key to the CPI escalation, as explained by Third Vice President and Environment Transition Minister Teresa Ribera in an interview with elDiario.es this week.

The overall CPI (Consumer Price Index) accelerated to 9.8% in March. The dramatic increase in electricity prices in this indicator has a key weight, for which INE in its methodology provides only domestic contracts covered by a voluntary price for small customers (PVPC). These contracts are most prone to growth in the wholesale market and will immediately pick up the drop that the aforementioned Iberian solution will bring.

Also in relation to the deficit of public administrations (the difference between revenues and expenditures), which left 4.2% of GDP. The central scenario, based on “the evolution of revenues in 2021 and early 2022, is more favorable than expected, exceeding the cost of measures to mitigate the effects of the war and worsen the macroeconomic scenario.”

Collect more VAT and spend more on pensions

Among its forecasts, the tax authority highlighted the increase in pension expenditures in 2022 due to the impact of inflation of 4.8%, which will be transferred in 2023 in the amount of 1500 million euros per CPI (Consumer Price Index). ), Which is related to its revaluation.

Similarly, inflation has a negative effect on the debt interest rate: “500 million inflation point”.

Conversely, this has led to a larger collection of taxes by 2022, mainly due to VAT, due to the impact of price increases (over 2000 million at each point of inflation) and due to social contributions, in this case. Improving the labor market.

With a full overview of the macroeconomic scenario, with growth deteriorating and inflation peaking, in 2022 revenues will increase by 0.3 percentage points compared to the previous forecast and expenditures will increase by 4 tenths, while the measures of the shock plan approved by the government. Increases the deficit relative to GDP by 0.6 points.

Less impact on recovery funds

AIReF also noted that “the positive effect of recovery funds [relacionados con el Next Generation de la Unión Europea] This year, it will add 2.5 points to GDP, only 1.8 as a whole, but we think that the performance will be complete according to the budget. ”

The fact is that the multiplier of calls for economic activity is reduced due to the current situation: high inflation, worse financing conditions, difficulties in world trade, because of vegetables longer …

“A blow that affects relevant sectors such as automotive, construction or key processes such as digitalisation,” said AIReF, recalling that “increased growth from these funds in 2021 was virtually zero due to performance delays.”

Impact of energy prices

According to the macroeconomic models used by the institution, “a 15% increase in energy prices will reduce GDP growth by 0.4 or even 0.5 percentage points, and now, as this is a global shock, the impact will shift to 2023.”

This is a significant effect, which may alleviate the gas limit for electricity generation proposed by Spain and Portugal, which is awaiting approval by the European Commission, although AIReF has not assessed it in reducing the forecast, nor has the Bank of Spain set it. Tuesday.