The Bank of Spain (BdE) has notably improved the prospects for the Spanish economy for this year, in a context marked by the rise in interest rates and the tightening of financing conditions, and in which the country is leads to the calling of new general elections on July 23. The agency forecasts that GDP will advance by 2.3% this year, seven tenths above what it had calculated in March and two more than what the Government contemplates in its latest macro chart, thanks to the pull that activity has been registering in so far this year and to the successive revisions of the data in National Accounts, that is, due to the drag effect. Looking ahead to next year, the country will advance at 2.2%, one tenth less than expected, while the entity maintains the calculation for 2025 at 2.1%.
This higher growth that the regulator refers to in the projections that accompany its The BdE estimates that the annual inflation rate will stand at an average of 3.2% this year (five tenths below what was forecast in March and well below below the 8.4% that he fired last year) maintains those of 2024 and 2025 at 3.6 and 1.8%, respectively. The reversal of the measures deployed by the authorities to deal with the energy crisis will be what explains the rebound in the shopping basket next year.
The CPI will put less pressure on consumers’ pockets thanks to the fact that energy prices will slow down more strongly and that those of food will also moderate, although “to a lesser extent”. Thus, they calculate that in the year as a whole these products will continue to become more expensive by 11.3% (a few tenths less than what they estimated in March). All in all, the organization headed by Pablo Hernández de Cos explains that despite the fact that the assumptions referring to the cost of raw materials are now somewhat more favorable for growth, this effect is offset “with a more negative impact on the activity of the hardening of financing conditions” than the one incorporated in the report published in March.
Activity accelerates between April and June
In a context in which the degree of uncertainty continues to be high, the risks regarding the growth projections are oriented “basically to the downside”, while, in the case of inflation, they are considered balanced. The entity also explains that between April and June the dynamism of economic activity would have accelerated slightly. Specifically, estimate, with all caution due to the incompleteness of the information available, that the quarter-on-quarter growth of the GDP could be around 0.6%, so that it would advance one tenth more than the previous one.
The BdE cites, specifically, how in its recent survey on Business Activity (EBAE) companies appreciate an improvement in the evolution of their billing in the current quarter compared to the previous one. Likewise, in the average for April and May, both the growth in Social Security affiliation and the confidence indicators for companies and households reached levels higher than those registered in the first three months of the year. However, its director of Economy and Statistics, Ángel Gavilán, has stressed that the quarter “has gone from less to more” and in recent weeks a slowdown in some indicators has been perceived.
The expansion of the activity since January is due, in his opinion, to factors such as the additional lower cost of gas -and, as a consequence of this, also of electricity-, to the positive global economic evolution, to the advances in the resolution of the bottlenecks in the production processes, the width of the financial markets after the episode of turbulence in March, and the high dynamism of the services linked to tourism and social activities (in contrast to the weakness of the industry) . In addition, the public sector would also have continued to act as “additional support.”
Economic affairs highlights the improvement in deficit, debt and unemployment
However, the Bank of Spain emphasizes that the information referring to the final stretch of the second quarter is compatible with a certain moderation in activity. Thus, for example, although the confidence and Social Security affiliation indicators available point to activity showing greater dynamism between April and June than in the first, the quarterly data for May are somewhat less positive than those for April. Similar signs of a recent loss of strength have also been detected on a global scale, especially with regard to the Chinese and euro area economies. The latter, in fact, entered a technical recession in the first quarter of the year after falling 0.1%.
Sources from the Ministry of Economic Affairs value the fact that the BdE points out that this year Spain will “easily” meet its fiscal targets for the fourth consecutive year. Compared to the previous report, they highlight, the fiscal forecasts for 2023 are revised downwards, presenting deficit and debt estimates that are even more positive than the estimates by the Executive itself. Specifically, the Bank of Spain estimates that the public deficit would stand at -3.8% and public debt would already be below 110%, in 2023. In addition, it is worth highlighting the fact that the regulator is revising its Unemployment forecast given the positive progress of the labor market, placing it at around 12%, and further reducing its unemployment estimate for 2025 (11.3%), seven tenths less than in its previous forecast.