Good economic data accompanies the coalition government before the election

“At least for this summer, our consumer surveys show that tighter monetary policy is on the way [por las subidas de los tipos de interés] It will not affect citizens’ leisure plans”, recently admitted the president of the European Central Bank (ECB), Christine Lagarde. After overcoming the pandemic, the demand for leisure and tourism will experience its special “boom” against all obstacles: rising prices, falling savings, loss of purchasing power or An increase in the cost of mortgages and other loans and Spain is the most solvent economy in the Eurozone under this reality.

The strength of tourism, presented in the latest data (1.2% more visitors arrived and 20% more spending in April compared to the same month in 2019), is one of the main reasons why our country’s GDP (gross) is growing has. domestic product) outstanding against Germany, France, Italy… or the entire Eurozone. After growing by 5.5% in 2021, a further 5.5% in 2022 and 3.8% in the first quarter, the OECD confirmed this week that Spain’s economy will grow by 2.1% in 2023 and 2.1% in 2024. This year it will increase by 1.9%, which is twice the average rate of society.

But behind these good ratings, which fly head-on with the “stagnation” or “decline” that Popular Party (PP) leader Alberto Núñez Feijo referred to this week, is not just tourism. Exports of other services related to consulting, ICT (tion or Communication Technology) or computing reflect health unknown in our country’s history. Falling energy prices, due to less dependence on Russia and government measures, have dampened inflation much earlier and much more than in the rest of the eurozone, giving oxygen to pent-up consumption. Outpacing the labor market, new records for Social Security workers are being set virtually every month, with permanent workers at the highest and temporary workers at the lowest. And also, the executive managed to lead Spain to lay out the recovery plan.

A calendar of economic data between now and the July 23 general election will confirm all of these factors. It will also show the main challenges that the new government will have in the short and long term.

On June 23, INE (National Institute of Statistics) will publish the second reading of GDP evolution in January-March. According to an advance published a few weeks ago, it increased by 0.5% from the last quarter of 2022 (3.8% year-on-year), before approaching pre-pandemic levels. The government does not rule out a revision of this data “as has happened in other cases”, although progress will continue to be very visible in European countries.

The figures for Germany or the entire Eurozone have already been updated. And if the advanced data indicated stagnation, with 0% or 0.1% behavior, now they directly show a state of technical recession (two consecutive quarters of GDP decline). A similar evolution in Spain is excluded. “In the rest of the quarters of the year, growth is expected to be lower than the first quarter, but around 0.2%-0.3%,” Funcas’ latest forecast panel report said.

The most recent major projections for 2023 and 2024, the OECD’s projections, show the strength of the external sector, with activity levels almost 20 percentage points above the shock of the pandemic. “Although the dynamism of Spanish exports surprised us in today’s context, its good performance goes back a long time. It started ten years ago during the financial and sovereign debt crisis, when many Spanish companies were forced to look abroad. about weak domestic demand,” explains Oriol Aspachs, economist at Caixabank Research.

Currently, First Vice President and Minister of Economy Nadia Calvino does not get tired of influencing the “competitiveness” of our companies. partly due to low inflation on the Spanish side. But also because of low wages compared to the average of society. Due to the latter, household consumption in our country is still lower than the last figure of 2019, but thanks to the stability of the labor market and the measures of the government, it will not give up yet. And according to OECD estimates, it will slowly continue to progress.

With sustained growth and less effort to fight inflation, the institute expects the deficit (the imbalance between government revenues and expenditures) to fall to 3.5% in 2023 and to decline in 2024. 110% of the gross domestic product. Angel Talavera, a Europe researcher at Oxford Economics, sees the “structural deficit” as one of the main problems in the long run. Economist Eduardo Garzon, on the other hand, believes that this should not be a concern, because “to solve the most pressing economic problems, it would be necessary to increase it.”

Regarding inflation, Angel Talavera emphasizes that one of the priority challenges in the short term is the “consolidation” of its decline. All forecasts suggest this will be the case due to cheap fuel, gas and electricity. At this time, the main thing is that food follows the same path. “I would support price controls or help for those who need it the most, if it’s easier,” says Eduardo Garzon.

This Friday, Nadia Calvino said that they will monitor food price data for May and June, which will be published on June 15 and July 12 respectively, with the release of CPI details for each month, to assess whether they will maintain the VAT drop on the core basket that has been in place since January . “This will continue until we have an adequate level of prices, given the impact on the pockets of Spanish families,” he admitted.

The worst economic ‘drink’ for the government between now and the general election on 23 July will be an ECB interest rate hike next Thursday 15 June. The most likely, according to most monetary policy experts, is another 0.25 percentage point increase, from 3.75% to where it reached in May.

This is the most aggressive escalation in the history of the official “price” of money, which started at 0% almost a year ago, and is trying to squeeze households, companies and governments to tame inflation. Its most visible impact can be seen in the rising Euribor, which could close June at an average of 4%, a record since 2008, which could require the new government to take measures for housing affordability, such as the one it has announced. In recent weeks, and what he has included in expanding the recovery plan, in addition to mitigating the damage to the most vulnerable mortgagees.

Inflation and rising interest rates are a direct attack on the purchasing power of families, which the government has protected in recent years by increasing the minimum interprofessional wage (SMI), revaluation of pensions with the CPI or other measures such as. A discount on fuel, reduced taxes on electricity or gas, free public transport or a 200-euro check for low income. All these answers will be reflected in the family budget survey, which will be published by INE on June 28.

Eduardo Garzon, a professor at UCM, points out that a “better and more ambitious revenue agreement and strict control of business profits” is needed. This May 2023, the majority of unions and employers signed a wage agreement with a 4% increase in 2023, 3% in 2024 and another 3% in 2025, with a review clause for an additional 1% increase. If inflation remains above this amount. This pact avoided 8.4% average inflation in 2022.

So far, the known data about the agreements signed in recent months or the agreements collected by the Treasury statistics are close to the agreement reached by the workers’ and employers’ representatives.

The government is expecting a margin observatory, which it could present in June or July, which aims to offer more transparent data on the ability of companies to turn rising sales prices into profits (by passing on higher costs) and thus more accurately determine the necessary wage increases for each sector to restore purchasing power. .

Given that it is the most vulnerable who are most affected by the threat of inflation, rising rates and, of course, recession, “a key objective of any government should first be a strategic plan to stem the rise in inequality.” Trusts Victor Gómez-Blanco, a researcher at Tilburg University in the Netherlands and Carlos III in Madrid, who considers it more important to address the challenges in the medium and long term, “guaranteeing basic public services such as health, education or pensions and thinking about the impact of artificial intelligence and robotics”. , rather than temporary problems such as inflation.

The best protection for households’ purchasing power after labor reform is labor market resistance combined with higher levels of employment. Temporary decreased by 14%. There are 20.8 million workers covered by social security at most, although the unemployment rate, at more than 12%, remains very high compared to the Eurozone average.

The labor market, for which June data will be released on July 4, is crucial. And it reveals fundamental, structural changes. The most obvious: minimizing temporary employment in the labor market. An effect that directly increases government revenues and reduces spending on benefits. Indirectly, by providing stability to companies and workers, it supports household consumption in general. Also their ability to finance themselves, related to the purchase of greater value-added solutions such as housing, or other durable goods such as cars, technology… goods that, in addition, require greater “consumption” as described. in economic theory. On the business side, this means potential improvements in productivity and competitiveness, even in internationalization.

Another structural effect is related to “better fit [del mercado laboral] against future crises,” the Ministry of Economy said. That is, “reduction of structural unemployment”, which all institutions recognize as the main problem of our country’s economy. Labor reform aims to prevent a recession from causing severe job losses, which automatically means a small drop in GDP.


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Source: El Diario

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