The threat of recession in the Eurozone is growing. And in the case of Germany, this is already the main scenario for 2023 for the Organization for Economic Co-operation and Development (OECD), which predicts a 0.7% decrease in activity. Dependence on Russian gas and the risk of a complete supply cut puts the economic engine of the Old Continent and other northern economies in a worse position due to the impact of inflation in the context of a general slowdown.
Spain is in a better position, which is going through a more intense moment of recovery. On the one hand, for being the country among the great ones that was the furthest away. On the other hand, due to the explosion of tourism and the service sector as a whole, after the first summer without restrictions due to COVID.
OECD expects our country to grow in 2022 and 2023. The organization predicts that economic activity will recover by 4.4% this year and will slow to 1.5% next year, although this will be the highest among major eurozone economies.
Spain is one of the European economies least affected by the war in Ukraine, but a slow recovery pushes a full reconstruction from the hole of the COVID pandemic until 2024. And the indirect damage that the recession will cause in Germany is undeniable.
In addition to the aggressive monetary policy of the European Central Bank (ECB). The institution decided to increase benchmark interest rates in order to “cool down” the economy and thus fight against inflation. The ECB is trying to make mortgages and other loans more expensive to curb consumption and investment and thus stop price increases. This policy takes into account the risk of recession.
5% inflation in 2023
Last Friday, INE confirmed that Spain’s GDP grew by 1.5% in the second quarter of 2022 – twice the rate of the eurozone. The statistics also reviewed that activity was down by 0.2% at the start of the year, “due to the impact of the pandemic, transport stoppages and the start of Russia’s war in Ukraine”.
Currently, including an update to these figures, the real-time AIReF estimate for the third quarter points to a further decline of 0.2%, already on the back of a drop in business consumption and investment. Although there is still a lot of data to collect, as the tax authority itself admits, which depends on the Ministry of Finance.
“Available information points to a slowdown in the Spanish economy in the coming months, after a recovery before the summer, in a context of very high uncertainty and escalating inflation,” Pablo Hernández de Cos, governor of the bank, lamented this Monday. Spain.
The OECD itself predicts inflation in the short term. According to their forecast, it will end this year at 9.1% and continue at 5% in 2023. Sources from the Ministry of Economy claim that next year, “it is likely that the increase in prices in Spain will be 1.2 percentage points. is below the Eurozone average, while emphasizing that “core inflation [que excluye del cálculo la energía y los alimentos no elaborados] It corresponds to the European average in 2022.”
Hernandez de Cos himself calls for measures to support the most vulnerable. And he also reiterates the need for an income pact that shares the losses of inflation between companies and workers. At stake without this agreement is not only who will suffer the most from an inflationary crisis, but also that the slowdown in activity will be even sharper because of the hit to consumption and the risk of mortgage defaults, among other consequences.
Source: El Diario