The Spanish economy would be in its last summer of expansion before an economic slowdown occurs due to inflation and the international scenario. The economists of the Savings Banks Foundation (Funcas) have warned this Monday of a "sharp slowdown in the economy" for the coming year and that will begin to be noticed in the coming fall. Geopolitical tensions due to the conflict in Ukraine, the energy crisis and the scarcity of raw materials, as well as the change in direction of monetary policy due to the risk that inflation will become chronic cloud the outlook for the world economy in general and for the Spanish in particular. In this context, Funcas expects Spanish GDP growth of 4.2% this year and a sharp slowdown, down to 2% in 2023. Specifically, the Funcas economists maintain their forecasts for this year; but they cut their previous forecast for the year 2023 by 1.3%.
As Carlos Ocaña, general director of Funcas, and Raymond Torres, director of the Funcas situation, have pointed out today Monday, these figures are subject to a scenario marked by great uncertainty and conditioned by factors such as how long the war in Ukraine will last or the evolution of energy prices. Despite this context of high volatility, the Spanish economy will grow above the European average throughout the forecast period.
As for inflation, the consumption deflator will grow by 8.8% this year and will remain high next year, at a level of 5%, based on a backdrop of rising energy prices until next spring. Although the figures are very high, it should be noted that these forecasts incorporate some of the measures of the Government's latest shock plan.
According to the updated economic forecasts for Spain 2022-2023, the dynamism of the labor market will continue, although at a slower rate, in line with the sharp slowdown in the economy. Until the end of 2023, nearly 600,000 jobs will be created, with which the unemployment rate will drop from 12% at the end of that year.
check to consumption
The decline in household purchasing power is already having a negative impact on growth. Domestic demand will only contribute about 2.1 points in the current year, 1.7 points less than in the March forecast. "This cut mainly reflects the loss of purchasing power of consumers due to inflation," they say from Funcas. Despite this, households will use the savings accumulated during the pandemic to finance their spending, which will allow a slight growth in private consumption.
Thus, Funcas predicts "relatively strong" growth rates for the second and third quarters, of 0.5% and 0.7% respectively. Funcas explains this situation due to the rebound in tourism, exports of non-tourist goods and services and the "pull" of employment, which has generated 263,000 net affiliates to Social Security in the first semester alone.
However, for the fourth quarter a "strong slowdown" is expected with a flat growth of 0%, in which the factors known as recessive are expected to gain weight. The director of the International Situation and Analysis of Funcas, Raymond Torres, highlighted the energy costs and supply cuts that especially affect the industry more than the services sector.
For its part, the contribution of the foreign sector has been revised upwards, up to 2.1 points (1.7 more than in March), as a consequence of the recovery of income from tourism to the level prior to the pandemic and, in to a lesser extent, sales of non-tourist goods and services abroad.