Bank of Spain Forecasts Slight Positive Growth in the Fourth Quarter
Cristina Herrero, president of AIReF, testified before the Senate Budget Committee on a Tuesday session, detailing a cautious view of the government’s budget outlook. She stressed that revenue collection toward year-end could be stronger or weaker than anticipated and warned that actual receipts might end up lower than what is officially projected. Herrero noted that if current collection trends continue, the gap between the observed figures and the government’s forecast could be substantial, potentially exceeding the projected shortfall by at least 10,000 million. The remarks underscored a mood of vigilance about fiscal stability and the need for transparent accounting practices to avoid built-in biases in the official numbers. (Attribution: AIReF)
When comparing with 2023, AIReF’s analysis suggests that if the anti-war measures in Ukraine are not extended, a scenario considered by AIReF to be roughly 3.3% of GDP, the deficit trajectory could deviate from the government’s stated target. In that hypothetical, the deficit would likely remain below the 3.9% of GDP level that the government has signaled as a ceiling for the year, but the path to that figure would be more fragile and subject to revision as new data arrives. This cautionary view reflects the institution’s insistence on re-evaluating assumptions in light of evolving macroeconomic conditions. (Attribution: AIReF)
This Budget has notable shortcomings, Herrero asserted, pointing to a collection estimate for 2022 that she described as unreal and to expenditures that appear incomplete because they do not reflect the ongoing use of measures already known to be in place. The remarks align with AIReF’s broader mandate to ensure that fiscal plans are grounded in realistic revenue assessment and expenditure commitments, and they emphasize the importance of accounting for policy measures whose effects persist beyond the current year. (Attribution: AIReF)
AIReF projects economic growth of 1.5% for 2023, a pace that is noticeably slower than the government’s 2.1% projection. The forecast implies a gradual return to pre-pandemic activity levels either by late 2023 or early 2024, depending on the trajectory of demand and external conditions. Herrero stressed that the pace of growth remains fragile, and momentum could stall if confidence remains subdued or if external shocks reassert themselves. (Attribution: AIReF)
She added that confidence indicators have yet to show a sustained uptick, while some metrics such as the PMI have entered what she described as constriction territory. Despite these signs, Herrero acknowledged a degree of resilience in the labor market, noting that job creation and employment quality appear to hold up even as broader growth faces headwinds. This nuanced picture points to a labor market that, while not booming, continues to support household consumption and stability. (Attribution: AIReF)
Herrero expects inflation to move lower than currently forecast, estimating it could settle around 8.9% in 2023 and then decline to about 3.9% if energy-related measures are extended, or around 5% if those measures are not renewed. The distinction underscores how policy choices on energy subsidies and related supports can materially influence price dynamics and the overall inflation glide path. The projection reflects AIReF’s emphasis on the sensitivity of inflation to policy design and the need to balance price stability with growth incentives. (Attribution: AIReF)
In short, the institution’s outlook paints a cautious yet hopeful picture: growth remaining modest, inflation gradually easing, and fiscal figures contingent on policy decisions and the extent to which anticipated measures continue to affect the economy. The analysis invites policymakers to scrutinize assumptions, monitor momentum indicators closely, and prepare contingency plans should macroeconomic risks broaden. (Attribution: AIReF)