The government will not finally present this Tuesday a new macroeconomic picture that would accompany the Stability Program 2022-2025 and the currently announced downward revision of 2022 GDP forecasts, amid high uncertainty from the war in Ukraine and rising prices.
Although First Vice President and Minister for Economic Affairs and Digital Transformation, Nadia Calviño, indicated that the new macroeconomic picture would be released this Tuesday, the Executive decided to postpone the presentation and it will not be shared at the press conference. Council of Ministers, according to government sources quoted by Europa Press.
Obviously the stabilization program must be sent to Brussels before Saturday April 30, so the government needs both the plan and the updated macroeconomic forecasts ready for this week.
Prime Minister Pedro Sánchez recently confirmed a downward revision to the 2022 GDP growth forecast due to the Ukraine war impact on the Spanish economy, while insisting that growth would remain solid. He described the pace as strong despite headwinds.
In a backdrop shaped by the effects of the Ukraine conflict and higher prices, national and international organizations lowered growth projections for Spain and raised inflation forecasts.
Domestically, the Bank of Spain reduced its 2022 growth forecast to 4.5 percent and raised average inflation to 7.5 percent. The Independent Authority for Financial Responsibility AIReF cut its 2022 GDP forecast to 4.3 percent and placed inflation at 6.2 percent.
On the international stage, the International Monetary Fund lowered its growth outlook by a point. It now sees Spain growing at about 4.8 percent, placing it among stronger euro area economies.
With this panorama of uncertainty, the administration has chosen to avoid frequent revisions. It will maintain a biannual forecast cycle, with updates in April to align the Stability Plan for Brussels and the autumn to prepare the budget framework.
Thus, the September estimates of the previous year were used to update the macroeconomic table accompanying the General Government Budgets for 2022, which projected 2022 GDP growth around 7 percent and a GDP deflator near 1.5 percent.
Forecasts for the unemployment rate called for an average of about 14.1 percent in 2022. The record level of Social Security membership surpassed 20 million, according to preliminary April data reported by the Minister for Participation, Social Security and Immigration.
The executive, which included in the budget plan a deficit path that would narrow to 5 percent of GDP in 2022 and continue tightening in 2023 and 2024, aims for deficits of 4 percent and 3.2 percent respectively in those years. The Finance Minister noted that the plan must be feasible given the measures in the Ukrainian crisis response, to achieve the target deficit this year.
This improvement in the deficit outlook should be mirrored in the debt ratio, with the latest projections pointing to a decline from about 119.5 percent to around 115.1 percent next year.
next request
Just a year ago the government prepared to present the Recovery, Transformation and Resilience Plan alongside the Stability Programme. The 140,000 million euro European funds slated for restructuring were expected to flow through to 2026.
Although the Ukraine invasion hit the economy, the execution of the Recovery Plan progressed at a steady pace in the first half of the year, with plans to mobilize roughly 24,000 million euros in calls.
The government has already signaled plans to request payments in the coming weeks linked to the Next Generation EU funds, representing the highest resource utilization in the second half of the year. About 12 billion euros is tied to milestones in the Recovery Plan, such as the approval of the labor reform.
In this context, it is particularly important to extend the Recovery Plan activity in concert with the loan facilities already announced under Next Generation EU, which could bring Spain to a potential funding level of up to 70,000 euros.
To advance these items, the Ministry led by Nadia Calviño has started coordinating with government departments to prepare the Recovery Plan appendix and related credit considerations.