The agency, deeply concerned about a potential cut in gas supplies, now estimates that pension spending will increase by 10.1% in 2023 at a cost of €15,000 million.
Runaway inflation that will continue in the coming months and the cut off of Russia’s gas supply. These are the two main risks that threaten the economic recovery in Spain and especially the pockets of the citizens, already reflecting the impact that the price increase has on references such as a sharp fall in household income and a decline in consumer confidence levels to levels not seen since the worst months of the pandemic.
These are the main conclusions of the new forecast report from the Independent Authority for Fiscal Responsibility (AIREF), in which the institution has increased its inflation forecast to 7.8% from the 6.5% it had expected just two months ago.
A situation that, as the president of the organization, Cristina Herrero, has explained, is already being noted in a remarkable decline in the purchasing power of households, especially those with lower incomes. All of this is also taking place in a context where the savings margins built up during the pandemic have disappeared and financing conditions are beginning to tighten.
The situation is of great concern. Especially given the inability to make medium-term forecasts of two factors that will mark the future of European economies between now and the end of the year: the behavior of the service sector, especially tourism, which drives the economy, and – What worries Airef most is the potential cut in supplies of Russian gas.
“There are risks, and many,” said Esther Gordo, director of the institution’s Economic Analysis Department, during the presentation. The main one is that tension in the energy market that has already forced Brussels to draw up an emergency plan that it will present next week, with mandatory measures to reduce consumption and thus the heavy dependence on Russian gas. “Basically, these are energy-saving measures and if the problem escalates, rationing for certain consumers will be considered,” Gordo said. “Of course these would be ‘war economy’ measures,” he warned, citing confirmation of the worst-case scenario.
Despite this scenario of uncertainty and the negative impact of high inflation on private consumption, Airef has kept its growth forecasts for Spain for this year virtually unchanged, cutting it just one-tenth to 4.2%.
The reason lies in the aforementioned good prospects for the behavior of the service sector and in particular tourism for the coming months. The second element in favor of the economic recovery is the good performance of the labor market, with intense job creation in recent months, thanks in part to the resilience of the services and construction sectors.
Tax Forecasts
AIReF has also revised its budgetary projections and estimates, for its central scenario, a government deficit of 4.5% of GDP in 2022, compared to 4.2% in the previous report and below the 5% of GDP set by the government. was set as a reference rate. The expansion of measures to deal with the energy crisis, the revision of the macro picture and the latest available information explain the change.
In particular, the extension of measures to deal with the rise in energy prices and the consequences of the war in Ukraine will lead to an increase in the deficit by 6 tenths of GDP. By contrast, the largest nominal increase in macroeconomic variables due to inflation implies a 2 tenths improvement in the balance in 2022. Finally, the inclusion of new information reduces the projected deficit by a tenth due to a more positive evolution in collection, partly offset by expenditure execution above what was previously estimated.
As a result, the deficit reduction would be 2.4 points in 2022, compared to 6.9% of GDP in 2021. The main factor for this reduction would be the phasing-out of measures related to the pandemic, which represents 2.3 points of GDP. represent GDP.
In addition, one of the factors that worries us most for the coming financial year is the expected higher expenditure as a result of measures such as the revaluation of pensions according to the CPI. With the new price development forecasts on the table, Airef now estimates that these costs will skyrocket by 10.1% in 2023 (compared to the 8.9% estimated just a few weeks ago), with an additional cost of €15,000 million for the state. .
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.
