Bank of Spain cuts growth to 1.4% in 2023 and raises CPI to 5.6%


The Bank of Spain projections improve growth somewhat this year, from 4.1% to 4.5%, thanks to good activity and employment behavior in the first half of the year.

Euskaraz irakurri: 2023rako hazkunde aurreikuspena % 1.4ra jaitsi du Espainiako Bankuak

The Bank of Spain has lowered the forecast by 1.5 percentage points growth of the economy by 2023to 1.4%, while increasing inflation for next year to 5.6%, 3.1 points more than forecast in June, due to the evolution of energy prices.

The lower GDP growth forecast for 2023 is based on things like still high inflation, less favorable financing conditions, increased uncertainty and declining global demand, according to new macroeconomic projections released by the entity on Wednesday. The recovery of pre-pandemic GDP levels would likely be delayed until the first quarter of 2024, about two quarters later than forecast by the entity in June.

For 2023, the Bank of Spain predicts that domestic national demand (consumption and investment) will contribute 0.9 percentage points, after household consumption growth has slowed by 3.6 points to 1.3%, and demand (exports and imports) 0.5 point will contribute to GDP growth.

For 2022, the report forecasts a GDP increase of 4.5% (four tenths more than the June forecast), reflecting a stronger GDP increase in the second quarter due to “strong exports of tourist services which more than offset the adverse effects of the war in Ukraine.

Meanwhile, inflation is expected to be “significantly higher and more persistent than June forecasts” as they reach 8.7% on average in 2022, 5.6% in 2023 and 1.9% in 2024, while the core year will reach 3.9% and will decrease to 3.5% in 2023 and 2.1% in 2024.

Behind these figures are “the surprises recently observed in the price increase” and “the new paths expected in the future for energy prices”, as well as “a more depreciated euro than in the June exercise”.

The Bank of Spain acknowledges that the projections are subject to “extraordinary uncertainty”, so there is a risk “downside for activity and upside for inflation”.

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Source: EITB


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