As announced in September, the Bank of Spain has just cut considerably its growth forecasts for the Spanish economy this year and next. With the latest information available, the agency estimates that GDP will advance this year by 4.5% and that in 2022 growth will be 5.4%. The growth forecast for this year is almost two points below what the government forecasts and what the Bank of Spain itself had forecast in September. And although growth will accelerate next year, Spain will not regain pre-pandemic levels until the first quarter of 2023.
These forecasts by the Bank of Spain are the first to include the reduction in growth observed in the second quarter of the year that was reported by the INE at the end of September. Then, Statistics corrected its own data to affirm that the Spanish economy grew only 1.1% between April and June. So the starting point is lower and that explains almost half of the cut in forecasts that the Bank of Spain has just made.
The rest is due to the impact that supply problems and inflation are having. In fact, the Bank of Spain believes that the Spanish economy is slowing down its growth rate in the fourth quarter. Their forecasts suggest that GDP will grow 1.6% quarterly, four tenths less than the growth observed in the third quarter of the year. The delay in the execution of European funds is also pointed out as a third factor that conditions growth.
And these factors will continue to slow growth during the first months of 2022. The economists of the team led by Pablo Hernández de Cos maintain that the situation will normalize over the next year, but even so, growth will suffer and GDP will grow 5.4%, which is a very high figure, but below previous forecasts. And also well below the 7% GDP growth calculated by the Government.
The new forecasts entail cutting the growth forecast for 2021 by 1.9 points and the forecast for 2022 by 0.4 points. This lower growth this year and next year will be delayed to 2023, the year in which Spain will grow by 3.9% and recover the activity levels it had in December 2019, the last full quarter without a pandemic.
Inflation will rise further in 2022
The rise in prices is one of the factors that are holding back the recovery and the new forecasts from the Bank of Spain suggest that inflation will continue to rise in the coming months. In fact, the report points out that 2022 will end with an average inflation of 3.7%, seven higher, on average, than this year.
Even so, those responsible for the report maintain that inflationary pressures will begin to decline clearly as of spring, both because the comparison of prices will no longer take into account the moments of pandemic, and because the bottlenecks that are increasing the costs of companies.
Less growth, but more employment
One of the striking forecasts of the report presented by the Bank of Spain is that unemployment will fall more than it had calculated in September, despite the economy cooling down. The new calculations suggest that the average unemployment rate will be 15% this year and will fall in 2022 to 14.2% and in 2023 to 12.8%.
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.