The Bank of Spain lowers growth for 2023 to 1.3% and warns that inflation will remain high in 2024, at 3.6%

The Bank of Spain it will end the year with a slightly more optimistic vision of the economic present than it indicated in its last quarterly report, but more pessimistic for the long term. The institution GDP has cut another tenth for 2023, up to 1.3%, and has subtracted another two tenths from the expected growth for 2024, up to 2.7%. Meanwhile, he has prolonged the high inflation scenario until 2024with an average annual rate of 3.6% still in that year.

In it Quarterly Newsletter of the Spanish economy published this Tuesday, the BdE does timidly improve its data for 2022. In the case of GDP, it expects a growth for the year as a whole of 4.6% (one tenth more than what has been reported up to now) and for average inflation it lowers the figure to 8.4% (three less than what has been reported). Inflation in 2023 would stand at 4.9% despite the fact that this data contemplates that practically all the shock measures approved by the Government will remain in force.

In these projections, the BdE also incorporates the data for 2025, a year in which if the scenario drawn by its economists materializes -something complicated due to the context of high uncertainty in which we find ourselves- GDP will continue to lose dynamismgrowing by 2.1%, while inflation will finally stabilize below the 2% mandate of the European Central Bank, at 1.8%.

With these data on the table, what is discards the Bank of Spain is a recession in a context in which large European economies, such as Germany, are going to suffer from it. This is something that was not entirely clear in its latest growth forecasts.

However, as explained by the institution’s Director General of Statistics, Ángel Gavilán, growth in this quarter will be 0.1%, data subject to “a lot of uncertainty” and impacted by the positive effect of the carryover at the end of the year. At the start of next year, this “sluggish activity will be more or less similar to that of the current quarter.”

Thus, these forecasts confirm that the Spanish economy nor will GDP recover next year that it lost in the pandemic, something that the large economies of the euro and the vast majority of the countries of the European Union have already done.

[El Banco de España avisa de que la recuperación del PIB perdido en la pandemia se retrasará hasta 2024]

This despite the impact of European funds that will contribute six tenths to the 1.3% growth forecast for 2023. It is a much lower impact than expected, insufficient to complete the economic recovery and the Bank of Spain has recalled that the estimate is subject to the scarce data that exists on the execution of these help.

In this context of growth and inflation, the Bank of Spain expects the Government to prolong the measures approved to contain inflation With one exception, the extraordinary discount on the retail price of fuel. This grant would end on December 31.

The ‘gas cap’ would last until the end of May 2023 and the rest of the measures throughout the next year.

In this context, the unemployment rate will grow slightly next yearfrom 12.8% in 2022 to 12.9% in 2023, according to these forecasts.

Besides, the public debt will close 2022 at 113.1% and in 2023 at 110.6%, with a deficit still 4.1% that year, one tenth less than expected by these economists three months ago.

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