The Bank of Spain asks workers and companies to share the losses due to inflation




Inflation closed 2021 at 3.1% after marking a historic December with a figure of 6.7%, the highest figure in three decades to be confirmed this Friday. Energy is behind much of the increase,
but its possible effect on the economy turns the Bank of Spain on its head

Pablo Hernández de Cos, the governor, has pointed out in his speech at the Spain Investors Day (SID), organized by Estudio de Comunicación, your concern. Specifically, it has pointed out the "challenge" for economic policy, the management of these levels of inflation, and their main fear lies in how the rise in prices is transferred to the economy. «Support for the most vulnerable layers of society is obviously justified.

But companies and workers must internalize that the degree of transience of the rise in prices depends crucially on the response of economic agents. For Spain - and also to a large extent for the rest of Europe - we are facing a price shock for energy products that we, in general, do not produce.
This means that a loss is generated for the country.
The priority should be to achieve an equitable distribution of this loss, thus avoiding a feedback of prices and costs that would generate additional adverse effects on competitiveness, economic activity and employment, "he indicated.

«In recent months an additional element of uncertainty has appeared, which is related to the strong rise in inflation. This rebound is the result of a confluence of factors. Among them, the base effects due to the sharp declines in some prices at the beginning of the pandemic, supply difficulties, the intense growth of energy prices (particularly electricity) and other intermediate goods, and the effects of the recovery of demand on the prices of some services ”, explained De Cos.

Thus, to date the usual speech of the governor had focused on trying to convey that it was necessary to prevent inflation from being fully assumed in wages, due to second-round effects, and then generating a spiral with effects on income. economy set.

The various institutions, including the Bank of Spain, consider that over the months the pressure of energy on prices should moderate. They emphasize that as of spring the cost of electricity would have to be reduced, with the consequent downward effect on inflation. Although, in any case, the analysis houses emphasize that the situation is subject to considerable uncertainty; There are even experts, as published by ABC, who predict that the CPI will continue at very high figures until at least 2023.

However, inflation is not the only threat to Spain. “There is also uncertainty about the duration of the changes observed in global supply chains - the so-called bottlenecks - which are showing a greater persistence than anticipated and generating a significant negative impact on activity. These problems are expected to moderate from the second half of 2022 but, again, this assumption is subject to high uncertainty, "he explained. It discounts that supply chain problems will continue to persist this year.

Likewise, a fundamental factor in this exercise will be the execution of the projects linked to the recovery plan. The use of European funds, in short. «Given its magnitude, the use of NGEU funds it will be a major determinant of economic evolution in the coming years. The projections of the Bank of Spain contemplate the realization of projects for an amount of more than 60,000 million euros between 2021 and 2023. But its economic impact will depend both on the rate of absorption and on the design and execution of the projects that are undertaken and the accompanying structural reforms “, he stated, while highlighting that in 2021 there had been a delay in the implementation of the funds.

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