Madrid (EFE).- The Bank of Spain calculates that economic growth will be around 2% in 2023, above the 1.6% it forecast in March, and has questioned measures approved by the Government such as the Housing Law or pension reform.
These are some of the conclusions of the entity’s annual report, published this Wednesday, and which updates its economic estimates bringing them closer to the 2.1% maintained by the Executive. The improvement is due to the fact that activity has been “more resilient” and the signs “of renewed dynamism” in the first months of the year, to which is added the moderation of inflation and the deployment of European funds, among other factors.
The reopening of the economy, the support measures deployed by the authorities, the dynamism of the labor market and the good performance of the foreign sector are other elements on which the resistance of economic activity has been based, as explained by the General Director of Economy and Statistics of the Bank of Spain, Ángel Gavilán.
Recovery of agriculture and services
By branches, “agriculture and services have already recovered their previous activity, unlike industry and construction”; while the forecasts for the evolution of activity in the 2023-2025 horizon anticipate a gradual closing of the gap existing after the pandemic between Spanish GDP and that of the euro area.
The Bank of Spain insists in its report on the “high and persistent” uncertainty in which these forecasts are made and points to risks such as “the possibility of new episodes of global geopolitical instability” or “new rises in the prices of energy”.
Another risk lies in the possible financial tensions that may derive from the tightening of monetary policy, a process that is “very fast, intense and synchronized on a global scale”.
Inflationary pressures will remain “very high”
Gavilán pointed out that, although inflationary pressures are easing and the peak of the episode “seems to be behind us”, core inflation and food inflation “still show high resistance to the downside”.
On this matter, the report indicates that “a very high proportion of products continue to show very high inflation rates” and, in fact, detail that 45% of the 129 subclasses of the harmonized index of consumer prices (HICP), without energy nor fresh food, “present inflation rates above 4%.”
Regarding food prices, everything indicates that the peak is “close”, but he has recognized that there are factors such as drought that can affect the supply.
Asked about the agreement reached by the social agents to raise salaries by 4% this year and 3% the following two, Gavilán said that it seems to be going in the direction defended by the entity “of sharing losses” to reduce the risk of effects of second round that feed inflation.
Government measures: too general and expensive
The Bank of Spain emphasizes that the measures approved by the Government to deal with the energy crisis and the inflationary episode “have not been useless”, but they have been “too general and too expensive”.
The entity is committed to proposals “focused on the most vulnerable, temporary and that avoid price distortions”; and they have recognized that it has been possible to “stop the coup”, reduce inflation and stimulate activity, but this could have been achieved “with a lesser fiscal impact”.
The report acknowledges that all the measures taken together have made it possible to reduce inflation by 2.3 percentage points in 2022, while they have contributed to GDP growth by 1.1 points, although it points out that their expected expiration throughout this year will have a negative effect on GDP in 2024 and on inflation in 2023 and 2024.
“Undesired effects” due to the control of rental prices
The Bank of Spain has warned this Wednesday that some of the measures included in the future Law for the Right to Housing, such as rent control, could generate unwanted effects in the medium term and reduce the supply and quality of rental housing .
The supervisor highlights that the future law places greater emphasis on the necessary increase in the supply of rental housing based on greater public-private collaboration, a progressive increase in the public park and greater tax incentives for those who rent homes with price reductions. in stressed areas.
However, as it warns in its Annual Report, some of the measures included, such as income control, could generate unwanted effects in the medium term.
The new law contemplates measures that limit the updating of rental income and the possibility that the competent territorial administrations that deem it appropriate to limit rental prices in stressed areas.
In this sense, the economic literature has indicated that, although price controls show the capacity to reduce rental prices in the short term in regulated areas, this policy can generate adverse effects on the rental offer, as well as segmentation in the real-estate market.
More measures are needed to sustain pensions
The Bank of Spain considers that new measures will be needed from 2025 to strengthen the financial sustainability of the pension system given the impact of the latest reforms launched by the Minister of Inclusion, Social Security and Migration, José Luis Escrivá.
The Bank of Spain maintains that, after the latest changes, the pension system “will have to face greater long-term spending obligations that have not been fully compensated on the revenue side.”
“The joint analysis of the main regulatory changes introduced in our pension system since 2021 —although it is subject to high uncertainty— suggests that, foreseeably, it will be necessary to adopt new measures from 2025 to reinforce its financial sustainability”, he points out. .
And, in this context, it points to the automatic adjustment mechanism included in the last block of measures and which will be activated from 2025 if there is a deviation in spending.