The domino effect that has hit the economy continues to take its toll on all forecasts. The latest to worsen the forecasts is the Funcas panel released this Wednesday. The document is on average between the estimates of 19 analysis houses and concludes that Spain will end 2022 with more inflation and less growth: GDP will increase by 4.2%, a tenth less than calculated in May, and prices will increase by 7.9%, one point more than estimated in the previous panel. Behind this deterioration are the usual suspects, led by the energy crisis and the war in Ukraine, which are putting pressure on and increasing uncertainty about the development of the global economy.
“Concerns about the global economic outlook have intensified since the last panel,” he warns think tank the savings banks. “The invasion of Ukraine has exacerbated tensions in energy and commodity markets, dragged down remaining prices and pushed inflation in advanced economies to levels unprecedented since the 1980s (…). Almost all participants in the discussion consider the external environment to be unfavourable, both inside and outside the EU. According to a large majority of analysts, this negative environment is expected to continue or worsen in the coming months.”
Funcas had already lowered its growth forecasts in line with key internal and international organizations in the face of an increasingly challenging environment. Inflation has been on the rise for months and has already become one of the top puzzles for governments and central banks. What was initially thought to be temporary price hikes – caused by the gap between supply and demand following the lifting of anti-Covid restrictions – have only worsened with the conflict in Ukraine: energy prices have settled into an upward spiral that has already infected much of the economy The rest of the basket, plus Russian threats to cut gas supplies.
In this scenario, none of the 19 analysis houses expects inflation rates below 7% for this year. Funcas is the highest at “8.8%”, while CEOE and Analistas Financieros Internacionales (AFI) are the most optimistic at 7.2%. A recovery of 3.1% is expected for 2023, up 0.9 points from the previous forecast. The core inflation rate, which excludes energy and fresh food “the most volatile items in the shopping basket”, was also revised upwards: 4.6% for this exercise and 3.3% for the next.
This sustained rise in prices has prompted central banks to change the course of their monetary policy, with rate hikes aimed at cooling the economy but risking slowing the post-pandemic recovery. “Monetary policy faces the need to contain inflationary pressures without derailing the recovery or creating new financial risks,” warns Funcas.
Despite the downward revision of growth, the panel points to GDP growth of 0.4% and 0.5% in the central quarters of the year, driven by a tourist season that promises record numbers close to those registered before the pandemic. However, this rate will moderate to 0.3% in the last three months of the year. “The end of the year could be weighed down by sharp rises in inflation and uncertainties arising from the war in Ukraine and its impact on energy markets – particularly gas supplies,” the agency warns.
Repsol has the worst growth forecast for 2022: 3.7%, compared to the average of 4.2% for the panel and 4.3% for the government. For 2023, it is the BBVA that is signing the worst forecast: GDP growth of 1.8% compared to the consensus of 2.5%, a percentage that is again down by five due to expected lower growth in the second half of this year tenth has been reduced. “The lower growth rate expected for the second half of this year has a greater impact on the projected growth rate for 2023, which has been cut by five-tenths due to reduced drag,” explains Funcas.
On the other hand, the positive development of the labor market in the first half of the year has led to improved employment forecasts: the expected average unemployment rate for 2022 will fall by two tenths to 13.5% and would fall to 13.1%. in 2023. It also improves the forecast of the government deficit compared to the previous panel by three and a tenth respectively to 5.2% of GDP in 2022 and 4.7% in 2023 – the government calculates 5% and 3, 9%―.