Funcas, the Savings Banks Foundation, lowered its growth forecast for the Spanish economy for 2023 to 0.7 percent, even as it lifted the 2022 outlook to 4.5 percent. The revision comes after a quarter characterized by a technical slowdown and negative momentum in late 2022 through early 2023, according to the foundation’s research service. This new view places Funcas among the most cautious observers among major institutions, underscoring a path shaped by subdued private consumption, lingering inflation, and ongoing energy market pressures. The government had earlier projected a higher growth path, with other institutions like the Bank of Spain, Airef, and the IMF offering mixed projections in the low-to-mid range around 1 to 1.5 percent.
Forecasts push for declining growth in 2023
At this moment, Funcas appears to be the most pessimistic among significant forecasters for fiscal year 2023. The foundation notes a softer near term through the year as private consumption stagnates amid energy price shocks and elevated inflation, which also dents consumer confidence. The report warns that inflation erodes household purchasing power and that many families may increasingly dip into savings to maintain consumption levels. Investment activity is expected to slow as economic uncertainty tightens credit conditions and geopolitical risks persist. The external sector should remain a marginal positive contributor, delivering a modest two tenths of a percentage point less than what was anticipated in mid-year assessments. Raymond Torres, the foundation’s Director of Analysis, and Carlos Ocaña, the Chief Executive, emphasize that a rebound should emerge after the initial weakness, with GDP turning up in the second quarter of 2023 as the energy shock eases and the economy shows resilience relative to other euro area nations.
Regarding price dynamics, Funcas projects that the private consumption deflator, closely aligned with the inflation measure used in daily analysis, will ease from a reported 8.2 percent in 2022 to around 5.2 percent in 2023. While this marks a continued reduction, it remains a high rate that weighs on household budgets and business planning.
The updated macroeconomic picture shows slower employment growth but not a reversal of the recent recovery. The forecast calls for about 220,000 more net jobs to be created from the second quarter of this year through the end of 2023, with the unemployment rate hovering around 12 percent by year end. Public finances are also under scrutiny, with the deficit projected at roughly 4.4 percent in 2023 while the government previously signaled a tighter target; public debt is expected to stand near 112 percent of GDP.
Funcas cautions that substantial uncertainty surrounds any forecast. The main risk factors include a deeper energy crisis that slows inflation relief, a more aggressive path for interest rate hikes that could test the resilience of highly indebted economies, and the potential withdrawal of ECB support that might leave a larger structural public deficit lingering. These elements could alter the trajectory of growth, inflation, and fiscal balances in the near term, complicating policy responses for Spain and its European partners.