The Governor of the Bank of Spain, Pablo Hernández de Cos, opened the conversation on Monday by outlining plans to revise the 2023 growth outlook and to adjust the near term inflation path. He noted that the average inflation rate for 2024 would be recalibrated as part of the central bank’s upcoming macroeconomic update, due in early October.
Speaking at the Economy and Society Chair of the La Caixa Foundation, Hernández de Cos said recent data point to slower activity in the third quarter and a softer pace in the labor market, even as some aggregate indicators stay resilient. The bank’s projections, first released in June, currently foresee a 4.1 percent expansion for 2022, followed by 2.8 percent in 2023 and 2.6 percent in 2024. Inflation is expected to average 7.2 percent in 2022, then 2.6 percent in 2023 and 1.8 percent in 2024.
The central bank stressed that persistent inflation, tighter financing conditions driven by higher interest rates, and ongoing bottlenecks across several economies have collectively weighed on global growth. These forces have contributed to a broad downward revision of macroeconomic forecasts, as explained by Hernández de Cos. He noted that even if a new recession is not guaranteed, the likelihood of a downturn triggered by financial conditions has risen significantly.
Loss of Purchasing Power: Household Realities
The governor highlighted that declines in real incomes at the household level serve as a critical signal for the economy. While overall wage growth has remained relatively steady, inflation has eroded the buying power of many households. He observed that wage bargains and profit margins have absorbed only modest inflation, while price increases are increasingly being passed through to final prices by businesses. This dynamic underscores the need for social dialogue and policy frameworks that fairly share the burden of rising costs between firms and workers.
Hernández de Cos called for renewed attention to rental markets as part of a broader strategy to preserve household purchasing power. He argued that rental contracts should reflect a balanced share of cost pressures between employers and employees, aligning with broader efforts to maintain affordability in a slowing economy.
Looking ahead, the governor warned that Spain’s economic trajectory will continue to depend on how price and cost pressures unfold. A sustained rise in costs, if not checked, could undermine competitiveness abroad and intensify job losses and slower growth at home. The emphasis remains on careful monetary and fiscal coordination to cushion households while keeping the economy on a path toward stability and gradual expansion. The Bank of Spain will monitor evolving price dynamics closely and adjust its forecasts as new data become available in the October update. [Cited from official statements and subsequent macroeconomic briefings on the Bank of Spain and financial institutions.”]