Brussels points out that inflation is “near” peaking and is expected to arrive before the end of the year
After growing in the first half of 2022, the European economy is entering a “more challenging” phase. This is shown by the European Commission’s Autumn Economic Forecasts, which indicate that the European Union is one of the economies most exposed to the effects of the war in Ukraine, with energy prices rising and unprecedented inflationary pressures. In this delicate context, Brussels predicts that the EU’s GDP will grow by 3.3% this year, before slowing down to 0.3% in 2023. The Spanish economy will in turn grow by 4.5% in 2022 and by 1% next year.
The energy crisis will weigh on European activity for the rest of the year and the EU will plunge into a technical recession, chaining two quarters of economic contraction. It’s not all bad news: “We expect inflation to peak soon, probably before the end of the year,” said economics commissioner Paolo Gentiloni. Still, Brussels expects prices to remain high for most of next year.
The Spanish economy will suffer from high energy prices, but activity is expected to pick up in mid-2023 thanks to the gradual increase in consumption and the normalization of tourism. This trend is expected to strengthen in 2024, when activity will pick up to 2%. The European forecasts represent a pitcher of cold water with regard to the Spanish government’s calculations for the general budgets of 2023, cutting them by half. “This difference is related to a lower contribution of private consumption and investment to the Spanish economy compared to the government’s forecasts,” said Commissioner Gentiloni.
Sources from the Spanish Ministry of Economy, for their part, have given a positive assessment of the European Commission’s forecasts. They emphasize that Spain will “grow above the eurozone in both 2022 and 2023” and that it will continue to follow the path of pushing the government deficit below 5% by 2025.
In the same way, the good behavior of the Spanish labor market is “confirmed”, “with an unemployment rate of less than 13%”. Brussels expects the European labor market to remain strong in the coming years despite the cooling of the economy, but next year there could be a “marginal increase” in unemployment from 6.2% to 6.5%.
Source: La Verdad
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