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Brussels cuts up to 4% the advance of Spain’s GDP in 2022 and raises the CPI to 6.3% | Economy

The war unleashed in Ukraine after the Russian invasion has caused a general cut in economic growth forecasts for the European Union as a whole. The GDP of Spain, according to the projections updated this Monday by the European Commission, will grow 4% in 2022 and 3.4% in 2023. The cuts compared to the forecasts of last February, of 1.6 points and one point respectively, they would prevent the country from recovering its pre-Covid-19 levels until the middle of next year, delaying for the umpteenth time the return to the pre-pandemic situation. The new radiography drawn by the Commission is aligned with those of the rest of the great analysts and with that of the Executive itself, which foresees an advance of 4.3% for this year.

The slowdown in Spain is similar to that suffered by most European economies. According to Brussels forecasts, subject to great uncertainty and volatility as usual since the pandemic broke out, the GDP of the EU and the Eurozone will grow by 2.7% in 2022 and 2.3% in 2023, a cut compared to the previous forecast, which foresaw advances of 4% during this year and 2.8% in 2023 (2.7% in the case of the Eurozone). Spain, however, will be the fourth partner that will grow the most this year, only behind Portugal (which increases by 5.8%), Ireland (5.4%) and Malta (4.2%). At the other end of the table will be Estonia (1%), Germany (1.6%) and Finland (1.6%).

The forecasts, recalls Brussels, are part of a scenario of price growth, driven by the rise in energy prices after the open war in the east. In the case of Spain, the Commission doubles the advance forecast for the consumer price index (CPI) in 2022 compared to the projections at the beginning of the year, going from around 3% to 6.3%.

“Inflation is expected to reach its peak in the middle of the year and an average of 6.3% in 2022,” said the Community Executive in its analysis, in which it has pointed to a deterioration in the purchasing power of the Spanish, which will cause consumption to remain at levels lower than initially forecast. In Spain, explains Brussels, the rise in energy prices has been faster than in other countries, which could have consequences, in addition to private consumption, in sectors such as transport, construction or the electro-intensive industry.

Even so, the Commission trusts that the inflationary escalation will be transitory. In fact, as other national and international analysts have predicted, the advance of the CPI is expected to fall sharply in 2023 to 1.8%. This figure, in any case, would mean seven tenths more than what was projected in February. It would be, yes, below the average of the eurozone (2.7%) and the European Union (3.2%).

In the risks section is the contagion of the rise in energy prices to other elements and products in the shopping cart. For this reason, Brussels forecasts that core inflation, which does not take into account the most volatile elements such as energy or fresh food, will remain high, reaching 3.9% in 2022 and decreasing to 2.7% in 2023.

Public finances

Beyond the new delay in recovering GDP levels prior to Covid-19 and an inflation rate that will weigh down the consumption of Spaniards, the country’s great problem is once again the sustainability of public finances. The Commission estimates that the public debt will stand at 115.1% of GDP in 2022, before falling to 113.7% in 2023. The ratio between debt and GDP is once again one of the highest in the entire European Union, only behind Greece and Portugal.

“Spain closed 2021 better than expected” in terms of the Government’s balance, according to community technicians, who mention the reduction of the public deficit from 10.3% of GDP registered in 2020 to 6.9% of the past anus. The Commission trusts that economic growth, extra collection and lower public spending linked to the return to normal health conditions will cause deficit levels to continue recovering to fall to 4.9% in 2022 and 4.4% in 2023 However, Brussels warns, the indexing of pensions to the CPI may lead to higher expenses if the inflationary period continues.

In parallel, investment will pick up 8.3% in 2022 and 5.8% for the following year, at levels well above the community average. However, in the shadows, Brussels warns that the crisis in raw materials and supplies could affect the green and digital investments of the Recovery Plan that channels European funds, one of the pillars of economic recovery together with the tourism sector. .

The labor market, meanwhile, will remain “strong.” According to Brussels, the unemployment rate in Spain will be at its lowest level since 2008, at 13.4% for 2022 and 13% for the following year. The growth rate of employment, for its part, will reach 2.8% in 2022 and 1.1% in 2023, above the levels of the community average and the euro zone.

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