The OECD estimates that this year inflation will skyrocket to 8.1% in Spain

M. Cecilio

The agency once again lowers the economic growth projections for our country by almost one and a half points to 5.5% of GDP

Edurne Martinez

Until now there was a certain consensus among the different economic organizations that inflation would moderate in the second half of the year. However, the OECD points out that prices in Spain will end the year with a rate of no less than 8.1%, five points more than previously forecast. It is a figure similar to that marked by the CPI in the month of May (8.5%) after having fallen slightly from the record of 9.8% in March, according to data from the INE.

In their new Economic Outlook report they calculate that Spanish inflation will be one of the highest in the eurozone: France will have 5.2 inflation this year, Germany 7.2%, Italy 6.3% and Portugal 6, 3%. Thus, the Spanish CPI will close the year, according to the OECD, well above the Government's forecasts (around 6%) and even those of the Bank of Spain (7.5%). In addition, this is not a specific problem for Spain, but rather that next year prices will continue at 4.8%, when in December, before the war broke out in Ukraine, the organization forecast an inflation of 1.5% for Spain in 2023.

And this increase in prices is not only due to the rise in energy products, but the OECD reveals that core inflation -which does not take into account energy prices or fresh food- will close this year at 4, 5%. In addition, the organization believes that this rate will remain unchanged next year.

The Paris-based organization puts a point of hope: it considers that the agreement between Spain and Portugal with Brussels to limit the price of gas in the wholesale market (the Iberian exception) "can help contain" the CPI in our country, although acknowledges that it will continue to be a “very high” rate in 2023.

The report indicates that business confidence and household consumption is "deteriorated" in Spain due to high inflation, and that both the manufacturing industry and services have been slowing down since March. Of course, it ensures that the greater influx of foreign tourists, already reaching 84% of the expenditure recorded in the previous year in March, which will allow a faster recovery than expected in the sector.

GDP cut

High inflation will therefore affect GDP, which the organization estimates will slow down after the rebound in 2021. The OECD estimates that the economy will grow only 4.1% this year and 2.2% next year, below Government forecasts (4.3% and 3.5%, respectively), which supports the stagflation hypothesis that the World Bank warned of this week.

In this way, Spain will continue to grow above the eurozone average, whose GDP will grow by 2.6% in 2022 and 1.6% in 2023, but much less than forecast in January. Without the war, the OECD predicted a jump of 5.5% this year and 3.8% next year.

All this due to the fact that the increase in uncertainty and high inflation will mean a cut in demand and private consumption, which will only grow by 0.1% in 2022 after having advanced by 4.6% last year due to the fact that Families will have to allocate more resources to the purchase of basic products and could retain part of their savings as a precaution.

As good news, the labor market. The OECD celebrates that the percentage of indefinite contracts has gone from 10% to 48%. It calculates that the unemployment rate will end the year at 13.6%, while next year it will rise to 13.9%, data well above the Government's calculations (12.8% and 11.7%, respectively ). His proposal is that inflation be transferred as little as possible to wages so that it does not fall into an "inflationary spiral" and recommends an income pact to social agents so that employees and companies share the burden of the inflation crisis.

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