The General Council of Economists (CGE) has improved its growth forecasts for Spain this year by half a point compared to its previous estimates to 1.5%, although they warn of the increase in the deficit (up to 4.9%) and the very moderate cut that is expected in the public debt. The European Central Bank is in the process of withdrawing its sentiments and will begin to dispose of the liabilities it accumulates in its balance next March, which could trigger our risk premium if adequate measures are not taken to avoid it.
According to the latest ‘Financial Observatory’ published this Monday by the CGE, the boost in exports (which have contributed 40% of income to the economy) and the recovery of tourism have contributed to the fact that activity could advance more than 5% year-on-year in 2022, as the Government also calculates. So has the favorable evolution of the labor market.
Economists highlight that the agricultural sector has already recovered and slightly exceeds the sectoral growth it registered before the outbreak of the Covid pandemic in 2019, unlike the industrial and service sectors, which still have not. Despite this, the tourism sector has begun to recover its vigor and is on the verge of a probably complete recovery.
Employment and GDP do not allow complacency
The president of the General Council of Economists of Spain, Valentín Pich, explained that, despite the fact that the recession has not been confirmed, the official figures atate that there has been a certain slowdown. “This, in a context of increasing public debt, without finishing controlling the effects of inflation and still pending to see the definitive effects of the ‘Next Generation EU’ funds, is indicating that we cannot settle for short-term figures of employment and expected growth”, has settled.
For the president of economists, bolder reforms must be implemented, both from the control of public accounts and from the levers for generating economic activity in the medium and long term. “The future drift of the Spanish economy, more than a year ahead, will be explained by what we are capable of doing in this year 2023; if we do it well, we are in a position to exceed our own official forecasts, but it continues to exist a latent risk of everything remaining in a transitory situation of what could have been but was not”, Pich indicated.
Regarding prices, the General Council of Economists has maintained its forecast of the inflation rate for 2023 up to 5%. It should be remembered that in 2022, inflation has managed to moderate to 5.7% in December, with a differential of 3.5 points less than the Eurozone (9.2%), the lowest rate. Regarding the labor market, the CGE has highlighted that it is responding well, with 285,000 fewer unemployed throughout the year 2022. The number of Social Security affiliates is close to 20.3 million, under the effects of the labor reform, that is influencing a greater formalization of contracts, but with a growing partiality. Looking to 2023, economists estimate that the unemployment rate stands at 12.9%.
The problem of public accounts
Regarding the public deficit, the forecasts for 2023 are raised from 4.5% to 4.9%, while they lower their estimates for the public debt from 114.3% to 113%. Despite this, the CGE has announced that, in nominal terms, outstanding public debt continues to rise to more than 1.5 trillion euros, an increase of 28,431 million in one quarter and 76,561 million closed compared to the last exercise, 2021.
It is expected that 2023 will be a good year for fixed income, which will continue to be marked by the monetary policy of the Central Banks, but geopolitical uncertainties will continue, for which reason economists recommend “prudence” in equities. For their part, they have warned that further rises in interest rates are very possible –mainly due to the delay in definitive control of inflation and the attempt to maintain a strong euro–, at least half a point if the conditions do not change. current conditions.