Inflation and the effects of the war are forcing the executive to cut its previous 2022 estimate by nearly three points, and Calviño acknowledges that the strong tourism recovery is “not compensating” for the worse international context
The war in Ukraine has eroded the way out of the crisis across Europe and Spain could be no exception. The government was forced to lower its economic growth forecasts for this year to 4.3%, from 7% of its previous estimates sent to Brussels. It is a more adjusted projection than that presented by economic organizations, with the Bank of Spain betting on a 4.5% advance and the International Monetary Fund (IMF) on 4.8%.
The government sent its new stability plan to the European Commission this Friday, as the deadline expired on April 30. And beyond the fiscal details of the document, the macroeconomic table presented this morning by Economic Vice President Nadia Calviño and Finance Minister María Jesús Montero reveals that there has been a turn of the wheel because of the worse performance of the economy, which, after overcoming the pandemic, is now facing a rise in inflation not seen since the 1980s due to the effects of the war and the rise in energy costs.
Presenting this data, Calviño emphasized the government’s “prudence” and “accuracy” in a highly volatile context and emphasized the “strong growth” investment will experience in 2022 (9.3%), although construction is “still always lagging behind”. The vice president acknowledged that the strong recovery in tourism is “not compensating” for the worsening international situation and the weaker growth prospects of our main export markets.
All these elements will lead to the economy growing almost three points less than expected this year, but the Executive is confident that the situation will straighten out and that the economy will grow in the coming years at a level similar to the previously calculated level. For example, GDP will grow by 3.5% in 2023, 2.4% in 2024 and 1.8% in 2025. With this data on the table, Calviño assured that the Spanish economy will be fully recovered from the pandemic in the first half of 2023. .
The loss of strength in inflation will contribute to this, although it is now rising strongly (it reached 8.4% in April, after the record 9.8% in March). According to the Executive’s forecasts, CPI will moderate to around 6% in the second half of the year to year-end, before falling to 2% next year.
But consumption, an element on which the recovery of recent years has been based, has slowed down. Data released Friday from the INE shows that household spending fell by 3.7% from January to March. However, Calviño believes that the “significantly contained savings” of households thanks to the measures taken during the pandemic is a “pillow” to cope with high inflation and uncertainty. According to his calculations, household consumption slowed down in the first quarter due to the carriers’ strike in mid-March, but he is confident that the second quarter (April to June) will show a better evolution.
This higher household spending, despite the price increases, will be influenced by the “very positive” trend in employment, especially from April, confirms Calviño, who also stressed that employment has been of “higher quality” since the start of the labor reform. The executive’s projections point to an unemployment rate of 12.8% for this year, which means it will be cut two points from the past, and it will be cut to below 10% by 2025.
The Fiscal Authority (Airef) approved these forecasts, although it warned in its report that no details have been provided on the impact of the recovery plan and recommends that the government “make transparency efforts in its implementation”.
Despite everything, Spain outperformed the eurozone average in the first quarter, which grew by just 0.2%, according to data released by Eurostat on Friday. The highest growth rate among the countries of the single currency with available data is taken by Portugal (2.6%), while the lowest was that of Italy (-0.2%). This data is much better than that of the United States, which contracted -0.4% from January to March, after growing 1.7% in the last quarter of 2021.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
