The Bank of Spain confirmed this Tuesday that our economy will lead growth in Europe in 2023 and 2024. The institute leaves this year’s forecast with a 2.3% advance, which is in line with the OECD’s improvement and the European Commission’s expectations. And the next one is reduced by 4 tenths to 1.8%. Although he remains confident that the unemployment rate will close at 12% this year and continue to decline to 11.3% in 2025.
The implementation of the Bank of Spain’s new estimates does not foresee this Monday’s upward adjustment of the INE’s GDP calculation until 2022, due to “lack of time” and because “we do not know the quarterly crash”, explained Angel Gavilan, director general of the economy and general. Bank of Spain statistics.
However, the downward revision of the behavior of GDP (Gross Domestic Product) in 2024 is explained by “a negative carry-over effect resulting from lower growth than forecast in June, both in the second quarter of 2023 and in the second. half of this year [para el tercer trimestre estima un avanace del 0,3%]As Angel Gavilan explains.
In addition, the reduction of 4 tenths of the forecast for the next year is justified by the “increase in energy prices”, which will once again put pressure on general inflation and the deterioration of the external context and increase in the financial situation. European Central Bank (ECB) official interest rate increase.
In fact, the Bank of Spain increased its forecast for price growth to an average of 3.6% in 2023, from 3.2% previously, and to 4.3% in 2024, from 3.6% previously. “The rate of annual decrease of energy prices has slowed down [principalmente del petróleo, y, por tanto, de los carburantes]And the way to slow food inflation has softened,” he explained.
More expensive oil and gas
In particular, the price of oil in June would remain below 78 dollars per barrel in the following months. Now, the expectation is that it will surpass $82 at least until the first quarter of next year. The same trend is observed for gas, which was predicted to be around 40 euros per MWh and is currently seen at around 50 euros.
On the other hand, in 2024, the institution indicates that the price evolution will be marked by the cancellation of shock measures that the government still maintains in force, such as the reduction of VAT on basic food products or public transport subsidies.
The institute does not see inflation normalizing until 2025. Of course, “in a context in which food price increases and core inflation are expected to moderate, both for non-energy industrial goods and services where it is linked to leisure, restaurants and tourism have recently contributed to excess inflation,” adds Angel Gavilan.
In fact, in 2025, the Bank of Spain only lowered its GDP growth forecast by 1 tenth, to 2%. What stands out, both next year and the year after, is the expected resilience of household consumption despite inflation and ECB interest rate hikes.
The institution is also optimistic about the company’s investments, mainly due to the implementation of the recovery plan. Meanwhile, look for the largest slowdown in the external sector, which was one of the main drivers of economic recovery after the 2020 COVID shock, due to greater weakness in both our European partners and our other most important buyers. The increase in oil and energy prices in general, as well as the limit reached by tourism, which broke records this summer.
With these expectations, the Bank of Spain is confident that the unemployment rate will close at 12% in 2023 and fall to 11.5% in 2024 and a little more to 11.3% in 2025. Some of the key messages are that interest rates are rising. “It’s already affecting activity,” but “most of it will be felt in 2024.”
Similarly, the coalition government’s measures continued to operate in 2022 and 2023, and “their eventual withdrawal later this year would have a negative impact on growth” next year. Finally, Ángel Gavilan downplays the impact of political uncertainty on executive formation through negotiations.
Spain’s growth is 4 times that of the Eurozone
“Spain continues to lead economic growth among the main European economies, with a GDP growth forecast that is almost four times higher than the Eurozone average (0.6%),” the ministry emphasized this Tuesday. in economic matters.
“In 2024, Spain will continue its economic growth for another year, as it is the only country among the main European economies for which the OECD maintains 1.9% of GDP in a context of deterioration,” they added from the ministry. Acting First Vice President Nadia Calvino.
Source: El Diario