First The Bank of Spain and now the Independent Accountability Authority. Airef revised its growth forecast for the economy until 2023 by half a point to 2.3%.The same estimate made by the Bank of Spain in mid-June is two-tenths higher than the official government estimate of 2.1%.
Airef released the mandatory ‘Report on budget implementation, public debt and public administrations spending rule 2023’ this Thursday, updating its macroeconomic perspectives. In addition to raising the 2023 growth forecast to 2.3% (vs. 1.9% predicted in the spring), The Ministry of Finance cut three-tenths of that. inflationup to 3.7%. Airef maintains its forecast of a public deficit of 4.1% of GDP for administrations as a whole by the end of 2023; this is two-tenths above the reference rate set by the Government.
2023: from more to less
The report, released this Thursday, attributes the highest growth figure for 2023 to an upward update of the figures published by the National Institute of Statistics (INE) for the fourth quarter of 2022 and the first quarter of this year. However, the Tax Office envisions a growth path that will go further and further down through 2023.
Thus, based on the information available for the second quarter, Airef real growth rate “slightly lower” than the first -while at 0.6%- higher than the euro area as a whole. According to AIReF, the Spanish economy has weathered the energy crisis better in the last three quarters than the euro area as a whole. However, a slowdown in growth is expected in the second half of the year due to the impact of interest rate hikes, which are expected to occur in full in the second half of 2023 and in 2024, on the real economy.
On the same Thursday, ESADE business school released its ‘Economic and financial report’ for the second quarter of 2023. Spanish economy shows signs of weakening in the second half of the year, mainly due to the decline in consumption by families and households. As a result, EsadeEcPol division forecasts growth this year to be between 1.9% and 2.1% (just below the 2.3% quoted by Bank of Spain and Airef).
deficit and debt
This a projection open 4.1% of GDP by 2023 -Two-tenths above the government estimate – one seven out of ten Compared to the 4.8% closing 2022, the Financial Authority estimates the budgetary impact of measures taken to mitigate the effects of the energy and inflation crisis at 1.1 points of GDP in 2023 (three-tenths less than in 2023); such as VAT reduction on electricity or food, or special tax on electricity, sectoral assistance or fuel reduction.
Also, the expected debt level will fall by 3.1 points Above 2022 level, up to 110.1% of GDP. Thus, at the end of 2023, a correction of 12.9 points, which is half of the debt increase caused by the pandemic, would have been made. This reduction will be supported mainly by nominal GDP growth with the high contribution of the deflator.
Faced with the preparation of the 2024 Budgets and considering that the call for the general election interrupted the usual procedures in which the State determines the spending rule for autonomous communities and municipalities, Airef warns that next year the European Budget will come into force again. Extreme Open Procedure discipline. Airef therefore urges the Ministry of Finance to propose expenditure growth rates for autonomous regions and municipalities in line with the recommendations made to Spain by the Council of the European Union.