tospanish economy shows signs of greater dynamism than expected in the first half of the year. Bank of Spain expects to revise its growth forecast for this year from 1.6% higher in March to close to 2% compared to the Government’s estimate of 2.1%. So far, it was in the most optimistic forecast range. . “The latest information shows that activity growth was higher than expected in the first quarter of this year, and this, together with the recent revision of the historical index, suggests that GDP could grow this year by 1.6% more than expected in our latest estimates,” the governor said. Pablo Hernández de Cos, Governor of the Bank of Spain, in the organization’s Annual Report, released this Wednesday.
In the introductory article of the Annual Report, Hernández de Cos welcomes the salary agreement between employers and unions until 2025, and warns that, in terms of pensions, a new system regulation will be implemented by 2025, according to the calculations of the Bank of America. In Spain, the reform of Minister José Luis Escrivá will not be enough to reroute the accounts in relation to the European Union and the automatic adjustment mechanism envisaged in the law will come into play. The governor also questions the control of rental prices introduced in the new regulation. housing law As for the financial sector, it calls for an additional share to be prudent in profit distribution and to strengthen capital against possible risk scenarios.
up revision
The next review of the Bank of Spain’s growth prospects will be held next June. “Growth forecast would have to be increased by a factor of five as INE corrected upwards in growth for the last two quarters of 2022 and activity in the first quarter was above our forecast.” Bank of Spain, General Manager of Economics and Statistics, one in ten, up to 21%.Angel Gavilan. But that doesn’t mean this will be our new projection for June,” he adds. There are some factors that will reduce the growth momentum and they include interest rate hike With the encouragement of the European Central Bank (ECB), their restrictive effects on the real economy will increase from now on.
Interest rate hike slows growth
“Transition to real activity and inflation In the Annual Report, it is stated that although most of the effects of monetary policy tightening have been felt since this year, they have now started to materialize. According to the calculations of the Bank of Spain, tightening in monetary policy for the time being In the last quarters, the resulting increase in the cost of loans resulted in a lower result. In 2022, inflation would be two-tenths (average inflation was 8.4% last year), whereas it would fall six-tenths from inflation. GDP growth The highest impact of last year (5.5%) is expected to be around 1.1 points in 2024.
Mortgages and bank deposits
In general, the Bank of Spain, the European Central Bank, the increase in interest rates deposit slower than expected considering previous episodes. However, the cost of new mortgages has already become more expensive 2 points From December 2021 to February 2023 (and up to 3 points if previous models continue). The rate of increase in interest rates is much slower to translate into: time deposits In Spanish banking: their salaries increased only by 0.75 percentage points over the same period, half of that recorded in the euro area (1.6 percentage points). Strong position, according to the Bank of Spain liquidity The existence of the Spanish bank and lower level of competition In the industry, they explain a large part of the fact that businesses pay their customers’ deposits worse.
inflation and wages
The institution estimates that inflation, which reached 8.4 percent in 2022 on average, will decrease to 3.7 percent in 2023. Looking at 2024, it predicts that it will take until 2024 for the Government to definitively withdraw the anti-inflation measures taken since 2021. add 1.6 points to next year’s rate (up to 3.6%). Bank of Spain figures 37,000 million euros The effect of the measures taken during this period. An inflation rate of 1.8% is predicted for 2025. Governor, Pablo Hernandez de Cosvalues salary contract It can serve to express a “fair distribution” of impoverishment between employers and unions resulting from the rise in the cost of employment. imported raw materials (first of all energy) and avoid “terrible” runoff effects.
Public debt and pensions
Bank of Spain, high public debt volume as one of the biggest weaknesses of the Spanish economy, compared to that recommended by “rigorous financial regulation”. In this sense, it observes that the pension reform finalized by the Government has taken on spending commitments that are not offset by the higher income of the system. “New measures will predictably need to be taken” from 2025 strengthening its financial sustainability” is stated in the Annual Report.
Vulnerable families for shelter
In recent years, the governor has warned that the “population ratio” has been tightened with the tightening of access conditions to both owned and rented housing. at risk of social exclusion and households with limited spending capacity on other goods and services”. According to calculations by the Bank of Spain, almost half of people living in rent are at risk of poverty or social exclusion, and 40% of families are destined to be. More than 40% of your disposable income housing (rented or owned). The bank supervisor finds the emphasis of the new housing law on incentives correct. public lease offer but the measures checking the rents charged to the tenant may have undesirable effects in the medium term (decrease in supply, loss of quality, increase in the cost of new leases).
Guarantees for youth mortgage
General Manager of the Bank of Spain, Economy and Statistics, Angel Gavilanhas shown some reservations about the Government’s decision to offer public guarantees to young people in order to guarantee 20% of the amount of a mortgage to cover the initial amount (down payment) to buy a house. For Gavilan, financial common sense with mortgages is good practice. no more than 80% of the value of the house, and not the 100% that will be reached with the approval of the ICO.