HE Bank of Spain slightly improved their projections. Spanish economy Until 2023, but be warned: food inflation has not peaked and will remain high throughout the year.
The agency raised its growth forecast for Turkey in its quarterly report published yesterday. Gross domestic product (GDP) for 2023 (three-tenths above the 1.3% projected in December). At the same time, due to the intense moderation expected in energy prices, it also cuts its average inflation forecast for this year by 1.2 percentage points to 3.7%. food inflation, however, it will remain high for the full year: BE has raised its forecast for food average inflation to 12.2% for the whole of 2023. Although this forecast is much higher than forecast in December (7.8%), the VAT deduction came into force in January 2023 to a broad extent. food basket and that, according to the estimations of the Bank of Spain, the tax cut is very significantly (90%) transferred to the final prices of the products.
Most worryingly, the 12.2% increase projected for 2023 will apply to prices that have already increased by 12% in 2022 (on average for the food subgroup). BE projects a 4.6% food inflation for 2024. The main reason why the overall CPI is well above this year is due to the “one to two years” delay in the reflection of the increase in production costs (energy and raw materials) to the final price. BE General Manager of Economics and Statistics, Angel Gavilan.
Overall, the Bank of Spain is now 2023 mmore growth, less inflation, more jobs, lower unemployment and higher interest rates More than anticipated for the Spanish economy in December. As a result, the 2023 growth forecast (1.6%) is still below the Spanish Government’s most optimistic forecast (2.1%) and represents a sudden stop compared to the progress made in 2022 (5.5%).
The outlooks released yesterday were finalized in early March before tensions emerged in international financial markets recently. The organization estimates that the GDP, which grew by 5.5% in 2022, will grow by 1.6%, 2.3% and 2.1% in 2023, 2024 and 2025, respectively. On the general inflation side, which averaged 8.3% in 2022, it is expected to decrease to 3.7% in 2023, to remain practically constant at 3.6% in 2024 and to decrease to 1.8% in 2025. According to new forecasts by the body headed by Pablo Hernández, the core component of prices will increase by 3.9% this year – a tenth more than in 2022 – and slow to 2.2% and 1.8% over the next two years. Because.
first trimester is better
What has happened since December for BE to improve its prospects? The first was an upward revision of growth (up to 5.5%) for 2022, which predicts a positive carryover effect for 2023, which started the year better than expected. In addition, a rapid correction is observed in energy prices. On the other side of the scales, rising interest rates, rising food prices and underlying higher levels of inflation are playing in the opposite direction.
In particular, the Bank of Spain makes a prediction. Quarterly growth of 0.3% in the first three months of the year One-tenth above what was recorded in late 2022. «According to the information provided by the latest indicators, the development of the Spanish economy in the first months of 2023 will be slightly more positive than predicted in December.» report states. In particular, it refers to indicators such as commitment to Social Security or the revival of tourism activity.
Regarding the expected decline in inflationary pressures, recovery of confidence and real incomes, improvement of global supply chains and intensification of deployment, “economic activity is expected to exhibit some increasing dynamism from spring”. Europe funds the Next Generation EU.
In any case, the “possible additional tightening in financial conditions” (due to the increase in interest rates) will play against the growth as well as the completion of the transfer of past interest rate increases to loans and housing loans. On the path predicted by the Bank of Spain, GDP will reach pre-pandemic levels in the second half of this year.