Madrid (EFE).- The Bank of Spain has raised its growth forecast for the Spanish economy by 0.7 percentage points in 2023, up to 2.3%, mainly due to the good performance of the foreign sector -in particular, exports – and investment, while household consumption will remain stagnant.
The increase in the GDP estimate for 2023 above the 2.1% forecast by the Government is also explained by the dynamism of economic activity, which would have increased slightly in the first months of the year, according to the macroeconomic projections of the Spanish economy for the period 2023-2025, published this Monday by the entity.
The contribution of private consumption to growth will be low, as it is “hampered by the decline that this component of demand has shown in recent quarters and the slackness that it would show in the current quarter.”
Discreet consumption of families
The Bank of Spain forecasts that household consumption will only advance by 0.2%, compared to 1.2% in its previous projections.
Thus, national demand (consumption and investment) would contribute 0.6 percentage points to GDP growth in 2023 and external demand (exports and imports) would contribute 1.7 points.
Regarding the final stretch of the second quarter, the entity indicates that a “certain moderation in the strength of the activity” is appreciated, since the indicators of confidence and affiliation to Social Security in May “are somewhat less positive than those of April ”, to which would be added the “tightening of financial conditions”.
However, the expansion of economic activity is expected to continue in the coming quarters, due to the resilience of the labor market, the decrease in inflationary pressures and the expected intensification in the deployment of projects under the Recovery and Resilience Mechanism.
For 2024, the forecast growth is revised downward by one tenth, to 2.2%, while the corresponding to 2025 remains unchanged at 2.1%.
inflation down
The entity revises the average inflation rate downwards in 2023, to 3.2%, half a percentage point less than in previous projections, due to the “projected cheaper energy raw materials”.
For 2024, it expects average inflation to rise slightly to 3.6%, while in 2025 it would drop to a greater extent, to 1.8%, data that has not changed compared to the forecasts for the month of March.
Regarding the underlying component of prices (without counting energy or unprocessed food), it will moderate its rate of growth in the second half of this year, although this will not prevent its average annual rate from being higher than in 2022. It is expected to reach 4.1% on average this year and slow down to 2.1% in 2024 and 1.7% in 2025.
In the case of food prices, the central bank estimates that “it would have already reached its ceiling in the first quarter” and foresees a slowdown that is explained by the decrease in the costs of some production inputs, although it acknowledges that “the reduction of some agricultural crops due to adverse weather conditions will tend to limit to some extent the moderation of these prices”.
Employment growth forecast at eight tenths
The employment growth forecast (measured in hours) for this year rises eight tenths, to 1.7%, while the unemployment rate improves half a point and stands at 12.2% in 2023, 11.5 % in 2024 (eight tenths less) and 11.3% in 2025 (seven tenths less).
Regarding the public deficit, it will fall to 3.8% of GDP in 2023, 3.4% in 2024 and 4% of GDP in 2025, while public debt will be reduced this year to 109.7% of GDP, in 2024 to 107.4% and in 2025 to 108%.
The report clarifies that these projections have been prepared in a context in which the degree of uncertainty “continues to be very high”, so that “the risks surrounding the growth projections are fundamentally downwards” and “in the In the case of inflation, they are considered balanced.
The economy will grow 0.6% in the second quarter
The Bank of Spain also calculates that the Spanish economy could have grown by 0.6% in the second quarter, one tenth more than the progress registered in the first quarter of the year, according to the entity’s latest quarterly report.
The report indicates that during the second quarter the turnover of companies is showing greater dynamism, as is employment, which could close the period with an increase of more than 0.9% in the first quarter, while household consumption would have recovered slightly.