Spain – Growth forecast improved and inflation down

The European Commission estimates that the Spanish economy will grow by 2.2% in 2023, which represents an improvement of three tenths compared to the 1.9% of the spring forecast and is also above the forecasts of both the eurozone and of the European Union as a whole, both with a growth forecast of 0.8%, and which implies a decrease, respectively, of three and two tenths compared to the May predictions.

Spain thus leads the growth forecast of the six largest EU economies in 2023, including Germany (-0.4%), France (1%), Italy (0.9%), the Netherlands ( 0.5%) and Poland (0.5%) and registers the lowest percentage of inflation expected for the current year with 3.6%, four tenths below the decrease predicted in May for 2023, while it rises two tenths with compared to the spring forecast for 2024, up to 2.9%.

“The Spanish economy recorded a very good performance in the first half of the year and exceeded spring expectations,” acknowledged the European Commissioner for the Economy, Paolo Gentiloni, at a press conference.

However, in 2024, real Spanish GDP growth is expected to moderate to 1.9%, compared to the 2% forecast in spring, a slowdown that Brussels attributes to the weakening of economic activity expected for the end of the current year, which It will last “at least until the first half of 2024”, according to Gentiloni. The forecast revises downwards the growth of the EU economy from the 1.7% expected in spring to 1.4%, as well as that of the euro zone, which falls from 1.6% to 1.3% in 2024.

The percentage of inflation in Spain is also well below the Community inflation forecast, which is expected to stand at 6.5% throughout the European Union by 2023 –compared to the previous forecast of 6.7 %– and drop to 3.2% in 2024, also one tenth below the May forecasts.

Regarding the eurozone, inflation has been revised downwards for 2023 compared to the spring, going from 5.8% to 5.6% for 2023, but it increases by one tenth and rises to 2.9% for 2024.

This new slowdown is expected despite the upward pressure derived from the expected gradual disappearance of government measures applied to mitigate the impact of high energy prices.

Core inflation, which excludes energy and food, will decline more gradually, as the impact of high prices will persist during the first half of 2023.

Asked if he is concerned that Spain will delay in the deployment and execution of European funds if the formation of a Government is delayed, Gentiloni stated that the Spanish situation is “quite good and better than that of other countries in which inflation is a problem” and has assured that he is not worried because Brussels “constantly deals with governments in office”.

In this sense, he stated that he recently met with representatives of the Government, including the First Vice President and Minister of Economic Affairs, Nadia Calviño, last Wednesday, who conveyed to him their “total commitment” to avoid any delay.

Despite the good forecasts for Spain, Commissioner Gentiloni has pointed out that although the EU managed to avoid a recession last winter, the multiple “headwinds” facing the community economy this year have given rise to a boost in growth “somewhat weaker” than expected in spring.

Thus, while inflation decreases, its future evolution is a “source of uncertainty” for the general economic prospects, as is the “brutal” war that Russia is maintaining against Ukraine.

However, the Italian has encouraged “confidence in the future of the European economy” that can achieve “sustainable growth” if it is supported by the effective application of national recovery and resistance plans, which “remains a key priority”.

At the same time, he added, “prudent and investment-friendly fiscal policies must be applied, in line with the efforts of central banks to control inflation” and has called for working “with determination” in order to conclude an agreement this year on the reform of tax rules before the end of the year.

Community services have explained that the delay of the summer economic forecasts, which are usually published in the month of July, allows key data published during the summer to be taken into account, including information on real GDP growth in the third quarter and inflation in August in order to offer a more accurate image of the economic situation and prospects for the autumn.

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